He now held,with Thornton,that a 'conspiracy of employers ,might retain any part of it.Cairnes holds this conspiracy to be a fiction.It is not,as is often said,a question of rich men bargaining with poor men,but of rich men competing with each other.The competition of capitalists,as he holds,will always take place,not from any mysterious characteristic of 'circulating capital,'but because,as things are,they are always on the look-out for profitable employment of their capital.That process keeps wages up as the competition of labourers keeps them down,and,though it may act slowly,will inevitably keep wages approximating to an average.(126)In this view Cairnes takes himself to be only expanding the doctrine which pervades Mill's whole treatise:in spite of the occasional obiter dicta about the wage-fund.He does not abandon --he declares that nobody ever held --the 'will-o'-the-wisp,--the absolute predetermination.(127)Certainly a doctrine which struck so thorough a student as one of which he had never even heard,and which appeared to him to be palpably absurd,could hardly have had the prominence usually assigned to it.When it has disappeared,the real point at issue is changed.Cairnes maintains that Thornton,though denouncing the sham doctrine,still virtually holds the old doctrine.Thornton said (128)that 'unionism could not keep up the rate (of wages)in one trade without keeping it down in others.'And this,as Cairnes says,implies some sort of 'predetermination,'though not the absolute predetermination of the abandoned wage-fund.The main difference is that Cairnes holds that capitalists will always compete;whereas Thornton holds that they will ultimately combine and then be certain of victory.(129)This,I think,indicates the true underlying difficulty.The 'natural'rate of wages,said the economists,is fixed by 'supply and demand.''Supply and demand'suggests the ordinary processes which level prices in the market.Thornton declares that 'labour'is bought and sold like corn or cotton.The analogy might be denied.Mr Frederic Harrison observed that 'labour'is not 'a thing'which can be bought and sold.Thornton treats this as a purely verbal distinction,and expects even his antagonist to admit that 'hiring'is simply a case of 'buying,'and therefore governed by the same laws.(130)If so,we may apply formula derived from the case of the market.Then we tacitly introduce the ordinary economic assumptions.The proposition that wages are fixed by 'supply and demand'is taken to mean that the rate can be deduced from the simple process of bargaining.The whole theory of distribution can be worked out by considering the fluctuations of the labour market:the value of labour being fixed by the number of labourers,and the demand for capital being represented by the rate of profit.The doctrine,it may be admitted,is approximately true at a given time and place.It simply generalises the arguments used in every strike.Capital may be driven from a trade if wages be excessive;the influx or efflux of capital will raise or lower wages in a given district,and so forth.The facts may often be inaccurately stated by interested parties,but their relevance is undeniable.The forces of which Cairnes speaks,the competition of capitalists for profits,of labourers for gages,and their effect upon accumulation and population are undoubtedly the important factors.It was precisely because the economists recognised these obvious phenomena that they convinced themselves and persuaded others.They talked a great deal of undeniable common-sense.They could,again,fairly demand that some allowance should be made for 'friction'--for the fact,that is,that competition and the various changes which it implies do not take place so rapidly and automatically as they assumed.They took,it is true,considerable liberties;they spoke as if capital could be changed by magic,and a thousand quarters of corn transformed into a steam-engine;or as if the population could instantaneously expand or contract in proportion to its means of support.They could forget at times that such phrases involve a kind of logical shorthand,and suppose a 'fluidity'of capital,a rapidity in the processes by which adaptations are carried out,which is unreal,and may cover important errors.
Still,with whatever allowances,we may accept the approximate truth of the assumptions,as describing the process by which immediate variations in wages are actually determined.
The real difficulty comes at the next stage.Granting the approximate truth of the formulae at any given time and place,can they give us a general theory of 'distribution'--formulae which can be applied to determine generally what share of the total produce will go to labourers and what to capitalists?That is,in other words,can the purely economic formula become also a 'sociological'formula?Will it not only assign the conditions which govern the particular bargains,but enable us to determine the whole process by which the industrial mechanism is built up?
That,as I take it,is the point at which the old economists broke down.Their doctrines,applicable and important within the appropriate sphere,become totally inadequate when they are supposed to give a complete theory of industrial development.
