SA 58. THE FUNCTION OF ECONOMICS, by Leon Maclaren

End of Term Lecture 23rd July, 1952.

Ladies and Gentlemen,

Is any study simpler than economics? A child could grasp it . Our difficulties arise·; stream and flow from the superstitions and  prejudices with which we surround it.

The Divine Wisdom which inspires all life and form makes this branch of learning easy to follow. Were this not true, we could despair of human progress .A knowledge of economics is essential to good government; and as men are best governed who govern themselves , a:. general knowledge of economics is necessary to good government  .

A voter who votes in ignorance forges the chains which bind him .All who  conduct business in ignorance inflict the injustices they suffer and are confounded by the confusion they cause. If the know­ledge necessary to good government were vouchsafed only  to a few, uniquely gifted to follow it, there would be no end to injustice and confusion. But this is not so.

The book of economics lies open before us .Its language is simple and its message clear. We may read it, not in any library , but in our daily lives and in our essential relations v1ith nature and each other. Let us look at it together .Lend me your imaginations so that our sight may be insight and our seeing understanding.

We find ourselves alive in a universe abounding with life. Like us ,  rock, plant, fish, animal and bird has each its own nature and carries the imprint of its kind.    We live upon them and with them and depend upon them for all our nourishment.   With their aid  we create new worlds of things’ beings’ ideas and imagination.

Our strength and quality largely depend upon the correspondence between the life within us and life without; upon our relations with the other creatures of nature, including our fellow men.

We can drain the swamp, water the desert, tame the beast and cultivate the soil. Cities we can build, where grass is lawn, trees are planted, and streets and buildings almost obliterate the face of wild nature, Not merely food consumers, but food producers, we are conscious partners in the miracle of creation.This is our special gift .

Yet our arts do not lessen our dependence upon the life about us. We make nothing,· except it is created from , and formed out of the universe and its creatures. Cut off from the earth we could not survive, for our industries would stop-, our works crumble, and we ourselves starve.    Like the one-eyed giant of the Greek fables we grow stronger while our feet are planted firmly on the ground. Wrench us from this, our source of strength, and all power runs out of us ,

This is the first lesson in economics.The human being lives, but depends for nourishment upon the rest of creation.

This limitation springs from our nature. We  are all land animals. We cannot long remain away from the dry surface of the earth.Here we arc based and from here we work. Access to land and the powers of nature are essential to each of us, essential to our life, growth and achievement .

Every natural limitation upon our activity is a source not of weakness but of strength. Being dependent on nature, we first marvel at it and then study it. We learn to till the soil; and the zest for life, instinct in everything , multiplies and varies our diet .We learn to tame the beast, and it lives and works for us. Slowly, as we learn more deeply to understand the life about us, ever greater powers exert themselves at our instigation, until the electron and the atom lend us a strength which startles and alarms us .

How puny a  man’s arm beside these titanic powers; yet our dependence on nature and her creatures set us to learn about them, and through this learning to borrow their spirit for the fulfilment of our desires.

Fools and tyrants may abuse those powers but will never win them ; They are gained by men in close correspondence with at least some part of the life about them; men who arc patient, humble and intent upon understanding .

So every day throughout the generations we go to nature for the bread of life, in search of food, materials, knowledge and inspiration .The more advanced our  civilization, the more immediate our dependence.    If coal were not hewn, oil not piped, electricity not generated for only weeks, our civilization would be thrown into chaos .

This human  necessity  makes land of the utmost importance to  the human race and the individual. We need land on which to live; room for a  house and garden , places to work, play , study and meet our fellows.

Our individual needs vary with our nature and calling . A farmer requires wide acres, a clerk but a place in an office; but the clerk depends upon the farmer and his acres so that he may work  in his office.    We  have each our individual and  social needs of land .

None of earth’s creatures can deny us land – except our fellow men. We have only ourselves to fear. This is the second lesson in economics .

All that I have said pertains not only to economics but to religion and philosophy, for the grounds of economics are the sphere of religion and philosophy. Hence it springs , and its object is to reveal knowledge which is good, just and practical, and  dispel superstition which is bad, oppressive and wasteful, so that we may govern ourselves wisely. We  need this knowledge be cause we need to live and work together in communities.

Consider our gifts, for all we have  is given.   The universe itself, our life and being, our powers and  talents , all are bestowed upon us . Our part is to make our contribution, a  little to give in  gratitude for a plenitude of blessing.

The best of life is in giving, and by our giving we live. This giving is our labour; and wether it  is a labour of love or a grudging tribute is for us to choose . Certainly we shall eat the fruits of our labour, be they sweetened with devotion or poisoned with envy .Such is the significance of labour in economics.

So we  live upon and by our gifts. Some are general, Showered indiscriminately on mankind – the teeming earth, the sun and rain , all the glory of the heavens, and the recorded wisdom of generations past .Others are individual, the special gifts of each and every one.

These special gifts are not evenly  distributed .  The strength of one is the weakness of another. A man is not a woman or a women a man. Youth and age are differently endowed. Each of us is most suited to play his destined part in creation . We were made to be interdependent; to play our part in reliance on others .Therefore we live in families and communities.

The function of a community is to set men free to follow occupations of their own choice in which they may cultivate their gifts, and grow in strength, skill, understanding and achievement; to give them the opportunity to make. their contributions and . make them worthily.

If every man had to be his own hunter , farmer, cook , builder and tailor, he would have  little energy left to develop his special  gifts. To cultivate himself he must specialise and to specialise he must rely on others . The hunter frees tho farmer to cultivate the soil;  the farmer frees the   builder to build ; the builder frees the tailor and they all free the cook .

Judged by those standards ,  most modern communities are failures. People cook, who dislike cooking , and our restaurants are monuments  of their indifference .Builders build who dislike building  and the suburbs of London sprawl hideous across our native land. Everywhere the cheap and shoddy of this lack-love civilization proclaims our failure. This is where economics as a special branch of learning should play its part .

People live not ‘only by giving but by receiving. Just to give Is to die of starvation.   Just to receive is to  die of senility – and the last condition is worse than the first. A  proper balance between giving and receiving is essential to human health .  To strike this balance and maintain an equilibrium in the moving miracle of life, where t he factors are unknown and unknowable and the weights·cannot be measured, is the task of government.

Nowadays statisticians seek to measure what cannot be measured and to weigh what cannot be  weighed. They do not aid government: they perplex it.

The problem of government is to preserve an equilibrium in society where the factors are unknowable.

Can it be  done? It can.

Everything in nature tends to equilibrium. If   any thing disturbs nature’s balance, forces come into play which seek to restore it. These forces arc not man-made or within his control, but they will work for him·if he will  let them.

Can we fissure an  atom? But not secure justice?

The problem of the economist is to understand the balances at work in society, to know what human actions disturb these balances, and sot the irresistible powers of nature at work to restore them.Knowing these disruptive actions, our task is to restrain them.

When disease attacks our bodies the pain we suffer at first is our bodies’    work in restoring the balance. If the balance is not restored we  are maimed or die.  So it is in society . W hen we  by  our actions disturb the balance, forces come into play to restore it which pay no regard to human life. Our injury is their work. If they fail, society dies; and  the worst and most terrible of these correctives are revolution and war. This is the greatest lesson economics has to teach.    It establishes our attitude to the problem.     Our task is to let natures balance preserve our social health: to know what disturbs this balance and prevent it

Justice is restraint . Confucius said:   “Do  not use your eyes, your ears, ·your power of speech or faculty of movement without obeying the inner law  of self-control. Act as if you were watching over an infant .”  Justice is this law of restraint. It rises from the nature of man and human society .

The balance between w hat w e give and receive is disturbed when any one of us takes without giving .Could anything be simpler than that? All who ·steal disturb the balance. All who levy tribute from their fellow men disturb the balance . Let us consider how men are able to do these things.

The impulse of human action is the will to live; and to live man must eat, sleep , mate and rear children . These are his primary needs, and if any one is denied , his whole being is filled with a single longing such as hunger or thirst. He  becomes ill, even demented or savage.      The urge to gratify those needs sends him to work. That is why he  does work; to give , to glory in giving. This urge may raise him to the stature of a god.; but it   may reduce him to servility and dependence .·

Why should a man endure slavery, injustice and deprivation when he could end it all so ·easily in  death? Because of something within him and he and the race must live. This inner knowledge , known by all creation , drives him on , and is the reason why men endure slavery , injustice and deprivation .

We  all know  that  justice  is better than oppression, freedom  than slavery,  and wealth  than deprivation . We all know  that our greatest pride is in something well done . We would definitely prefer to enjoy this better state . Our  difficulty  is  to  see  how,  to  enjoy  it – and live . It is the  task of  the  economist  to  point  the  way.

The   urge   to   live   debases   men   only  when   the   balance between giving and  receiving  is upset .     What  then  upsets it?

Brute force . This  we  have  learnt  in  Britain to  restrain .  Men move  about  on  their lawful  occasions without fear  of  the  tyrant’s  gun.

After force , what next ? The  deprivation  of some essential  to  life. And what  is more  essential than land ? Deprive men of land , and you  have deprived them of the most essential  thing  in  life ,  and  they will  slave , tolerate  injustice and deprivation . When some  own  the earth , and all the others are but strangers  and  sojourners upon  it , then are the others dependent on  the  few.

Where  land  is enclosed , poverty  is inevitable . To gain access to  the  earth and its powers  men  must pay tribute. Those  who   pay   most will receive  the land . The more they pay , the  less  for  themselves and , in  the  struggle f or life , they will be  reduced  to  animal existence .

The  need  for  food ,  clothing  and  shelter  for  themselves and  for  their  families  will  dominate  their lives . They will not  give  what  they make; it will be taken from them .The joy of giving will be overwhelmed by the fear of losing. What they may retain they will cling to , and who will upbraid them  if  they  too  seek  to  levy  tribute   from others ?

Meanwhile·,   the   doyens   of   society ,   the  elegant   and  cultivated ,  the   examplers   to   all , will   live   not   by what they contribute to life , but by what they take from  others . They are , of course , the  first to  complain  when the humbled means of their exaltation imitates them , when the building labourer  seeks a  reward without  working .

This primary wrong – this forced dependence of the landless many on the landed few – produces a second dependence .

A  human  being has  the power  to make  tools to assist him  in  his labour . It is not  only  a  power  but  a necessity to his full development .    His  tools  are an  extension of  his physical strength which  give  full  play  to  his  gift s . What use  a  pianist without  a piano?  And  how   many  pianist s have been lost  for  just this reason?

Where men are left  so  little of  the  riches  they  make that they with difficulty fulfil their primary needs , they cannot hope to  acquire the  tools necessary for their work . . Thus disabled , robbed of their man made arms and eyes , they are  forced to borrow  and to  pay  a  tribute to the  lender .

To-day the  palaces of  the  money lender  out-vaunt the principal administrative offices of the owners  of    creation . Lombard Street outweighs , in massive opulence , the rock  of Levers on Thames Embankment .

This dependence on the money lender produces yet another. The moneylender wants security to  secure his unearned income .   He will not lend  to anyone .   His  fears brood a new  class   of   men. ,   skilled   in  a special art. Theirs is the gift to raise loans and use them for the benefit of unearned incomes .    These men become  employers , not be cause of  their  special knowledge  of  the  trade , but  because of their financial skill .  They  employ  others  to  run their business  for them.

Thus   grows   up  a    new  dependency   of   employee   on   employer for   the   tools   of   employment ,        This   completes   the   enclosure of   land ,   for   the   new:   class   of   employer   ousts   the   small tenant , who   is   sent   looking   f or   employment ,   and   in   the  end our best engineers , scientist s , designer  and professors become  servants.The   direction   of work  passes   out   of   the hands   of   those  w!ho   do   it   and   even   education   be comes servant to the new masters.

All these dependencies on landlord , moneylender and employer , and the tribute of rent , interest and unearned profit , grow out of the first and continuing injustice , the  enclosure  of   land. This  is the  substratum , the cause of weakness in  the  many and  the  power  of  tribute in  the few ,  Without   it ,   all   would   have   to  work   for   their   living .

The   law  of   property  in   land   i s   t he   most   important economic  institution in any community . If this  is wrong , little will  be right . It  is fundamental .

Every primitive community knows this and guards its customs  concerning land with jealous care. Only conquest , or the  gradual development  of  society which  outgrows  old institutions rendering them useless , can  overwhelm  these early institut ions . Force  is always needed to break them , as when Henry VIII enrolled  his  Swiss  mercenaries, and the gentry of  tho  eighteenth  century  enlisted  their  sons  in the hated Yeomanry .

Only  when  absolute  private  property  in  land is finally established does the economic decline of  civilization truly begin. This happened in Britain about 1800 ,  From that date we measure the decline in craftsmanship and creative skill.  Then. began the growth of hideous towns, populated by rootless , depressed thousands, bred in squalor and  ignorance .The way the people have raised themselves from the degradation of that terrible century proclaims the resilience of the human spirit and the power for good in every one of us.  But though slow, decline in the general standard continues.  Not merely the poor, but all classes are infected .    What one of us, old enough to remember, is not startled by  the drop since 1938?

Fortunately, the will to live goes on , and people in all places there ar who are still giving their best. There are those employers – or managers , if not employers , for the employer is often a limited company – those .who have the management of concerns, who try not merely to do their part but instil in others a sense of responsibility and pride , to waken in those who work for them the spirit of endeavour. There are those in  the schools who humbly plod to discover the truth, and refuse to be distracted from it by  promise . of advantage or tbreat of penalty. Everywhere throughout society, men there are who   are giving  of their best;and, whether they be receivers of unearned income or not, for what they give we are grateful , for by their giving are we all enriched.

Men have powerful secondary needs , the needs of the artist .   No sooner does a  man feel that he can feed, clothe and shelter himself and his family with reasonable security ,  than he turns his   energy to culture , to the arts of cultivation and to self-development . He  needs to do this for it is his special  human power  and  his  special human  need  to develop this  higher  cultivation  in his work  and life .  Those who  are  fortunate  enough  to  be able to pursue this end may be grateful , f or just as denying men food reduces them  to  hunger , illness, and to savagery , so  to  deny men   these  powerful secondary needs is to reduce them in sensibility , balance and morality . The disorders of this age , the neuroses , the· frustrations , are  just that. They  are  the  hunger  of  the  soul .

But  nature is kind . Pain  dulls  sensibility , and those people who  are condemned by poverty not to pursue their special gifts , who find themselves doing work they do not like and are not    fitted f or, who live in poverty, with difficulty raising  their  families , those  people  are often  saved  the pain of the denial  of  their  real humanity by  becoming  unaware  of  it . They  go  about  almost under an  anaesthetic .

How many of  us  walk  about  in a kind  of  twilight  sleep , neither waking nor sleeping ,  our sensibility dulled? In peace , if it endure for about half a generation , we grow insensible to cruelty ,  to  sudden  death and  disaster ; but let a major war be in being for a year , and we  eat  horror  for breakfast , dinner  and tea , and think nothing of  it. Our sensibility is dulled because otherwise we could not endure the  pain .

So  it  is  that when  men  are  denied  their human development as human beings , their sensibility is dulled . Do not let anyone blame these people who are dull , dim , unresponsive .    If  they were responsive  they  would be  in revolutionary armies ; indeed  that  is where the revolutionaries came from, the men who have not been dulled and who  cannot  endure  what  they suffer . If we deny human beings  some  essential  elements in  life,  we  create a condition  where  men  give their labour  and  what  should be theirs is taken  from  them;  at  one end of  society the  denial  of  life, and  at  the  other  end  people  living wrongfully . These   last   set   the   standard   f or   the  whole   community,  and foster a condition where more and mo re people regard what they obtain from others as important and what they give as secondary , until  this  valuation  becomes   the  ethos  of  the whole community .   When  this  happens  civilization is  doomed .

Such is the importance of Justice ; and the function of economics  is  to  point  the  way  to  Justice.

Meanwhile , what   of  the government ? Here  again  the Divine wisdom which shapes and forms you and me and our society , has  made  provision  for  government . I need not weary you with it , because  you have been  through  it all. But from land , the value of which grows  as  one moves  from  the fringes  of  the   community  to  the  centre , springs   the natural  fund  to  sustain  government.

There it is, produced year in and year out.What is more, by taking  it, the government would preserve a kind of equality. A farmer on poor land cannot produce as much as a farmer on good land, and not everyone can be on good land. A farmer cannot produce as much as a merchant anyway, and not everyone can be a merchant. And in a sense it is not the farmer on the good land or the merchant who are producing the surplus of good things which give value to land, for they could not produce this abundance without the community. Now let me turn about, and look at the picture from the other side, from the end of economic events as they appear today.

What I have been saying to you works itself out in every detail of our economic life, and expresses itself most clearly in prices and employment.

Now, what has happened in these spheres? As we came through the post war boom, employment became more plentiful; trade expanded, the number of people at work increased; wives went to work; sons. and daughters went to work; the  hours  they ·worked  lengthened; and with each consequent expansion  in  the  family  income  they  grew richer and  stimulated their own  industry  to answer their  own  needs .

But  all the time the unearned  tribute  of rent ,  interest , taxation and unearned· profit were  rising faster and  driving  wages down . The people:  gained  in  wealth only  because  they  worked  more and worked longer. Their rate  per  hour  or  week   or  month was  all the  time· falling in real terms.Rising prices more than absorbed increases in  money   rates  of  pay.

Prices   are   determined   by what   the   producer   at   the fringe. of  each industry  must  earn  to keep  in  it.The charges he has to meet have to be met out of the prices his produce fetches .· As   the  charges  on  his  business rise he  just  passes  them  on  and as  he   passes  them  on , prices   throughout industry   rise,  and   as   prices  rise ,   real wages fall .

Recently,   a   time · was   reached .when   the   rising   tide   of prices  was checked . It went  on   rising but  not  so fast . At that  time,  marginal industries  failed  because  they could  not  carry  the burden  of  unearned income . The amount  of  land under  production was reduced .     Agriculture, Forestry, Fishing  suffered . Now in this period people were hungry.. There was not enough food, and the contraction of production caused by these impositions on the margin sent prices of food rising faster than ever.

Other prices followed suit until men could work no longer, there were no more members of the family to go to work, they were all working as long as they could.

Then the rising tide of prices meant to them a falling income. That began about eighteen months ago . Then the housewife had to pare her budget.When she did that, trade failed.The first failure was, of course, in clothes, because there she could save most easily. Now you see this pathetic spectacle – you see Lancashire hit.The employers appeal to the Government for help; the Government considers reducing taxation on cotton goods; it does make some concession – a small one. The employers themselves look desperately around to see how they can stimulate trade and they slash their prices. But when  they do that, when they slash their prices, when taxation on cotton is eased, that does not substantially increase the sale of cotton, it only means the housewife has more to spend on food, rising fares and housing .  And every relief in the cost of clothes goes there. So the cotton industry finds that its price slashing policy does not work well,Instead of increasing turnover (sales do increase of course; but they do not increase enough) instead of increasing, turnover drops.That is the situation now in cotton and it is coming on fast in other industries – wool,furniture, radio sets and the like.They are all going to suffer.

Why? Because the earning power of the people has been  reduced every day that prices rose, and it was that reduction in the earning power of· the people  that ha s  made them too poor to buy the fruits of their own · industry , and has thrown  them out  o f  work.

Now   they   must   look   for   work  working  for  unearned income s   ( which to-day  means   armaments   and a few luxury trades , because most of  the excess  is now  taken  by .the Governmient ).        But   notice   this   – they are put  out  of   work by   their   own   poverty . What   is   the Government’s   solution ? – wage restraint! “Keep  wages   down ,”they say. “Put interest rates up”. I   tell   you   it  is  lunacy .  Falling earned  incomes  and rising unearned  incomes  was  the ·cause  of   the trouble .    When the financial crash comes ,  remember that .

In   this   country   we   are  victims   of··our   own  idea   that the profit of industry depends on how much is taken out by people  who  are  putting nothing into  it ; and: the  only way   to make industry profitable is to  ensure  that those who are putting their life’s work into it·take as little  out as possible.  Such  is our  attitude; it  is taught in the schools   of   economics, preached  by   the Government, whether labour   or   conservative .   How  ugly it   is ,   how   sterile. What   a   sad  reflection   on   our   economy .

Here we are , impelled to live by some· power ·we do not understand .To  live we must  give , and once you start giving – once  you  start  working  and  expending  your  talent – it grows  upon you until it becomes your  chief  occupation in  life , like  the  mother  with her  children . She  does not count what she receives ; nor does the man once ·he ha s found   his  calling. The  more  important  his· calling be comes to him, the  less  important  the  reward  he  receives becomes. That is natural, and that way of life is only being defeated because our society has so far disturbed the balance that there is as much taken out by people who contribute nothing as there is by all the people ·who work. Those are the facts when taxation is included in the calculation.

The Government’ s taxes and the unearned incomes paid in Britain equal the whole of the earned incomes in Britain.

Now see where it has led us to. Watch the corrective forces of nature at work. Unearned incomes have gone too high, our economy is out of balance . How are they to be reduced?           Simply by smashing industry. Let industry stop and then there is no unearned income , and that is what happens every depression . The balance is restored by depression or war, one or the other, or revolution.

That balance will be restored , make no mistake about it, but the restoration is very  painful. It hurts, and if by any chance it failed and did not restore the balance, then our little civilization would be gone . Not,I suppose , that that is important.

Surely we can add our little line to the poem of creation. Surely we can bring justice into our economic dealings, restore nature ‘s  balance; for economics is simple. There is nothing difficult about it once you  have seen it, once you have overcome the difficulty of removing preconceived ideas, prejudice and superstition. It is so simple , so wonderfully balanced that you know that all men could understand it.   It has that simplicity, which all truth has .It has that strange quality. But it  is  profound, it lies beneath the surface and is not at once self-evident .

I have tried to-night to put before you a broader concept of what the principles of economics really are .

Justice consists in permitting the natural balance of society to maintain itself . We cannot maintain it but we can restrain ourselves from upsetting it. The best government lies less in what we do than in what we do not do.

You may have observed that government can only act by restraint, it has no other power, and it has no other power because restraint is its function.     The best of all government is self-government; and that is what Confucius meant when he said, “Never use your eyes , your ears, your tongue, your faculty for movement without obeying the inner law of self-restraint .Act as though you were watching over an infant.” He meant what he said literally . To put it in other famous words – “Do unto others as you would they should do unto you .” Economics teaches the same lesson.

Would you go and seize another man’s land and turn him off? Would you  wilfully reduce a man into poverty, and see his children uneducated and ill-clad?   You would not do any of these things knowing  you  were doing them; but we are doing them and we must cease doing them . That would be justice .