768 REPORT— 1895. 



may shed illumination on dark or obscured problems, that it may prove, in Bacon's 

 language, not merely ludfei- a, hut a]sofn'cfifera, may, I think, be shown by a brief 

 consideration of some typical questions of the day. 



I. Few are more prominent than that of industi'ial strife. We deplore its occur- 

 rence, and are read}^ to welcome any promising means su<fgested for mitigation or 

 prevention. Nor does popular opinion refuse to economics a voice in the matter ; 

 but, on the contrary, its authority is continually invoked. AVhat, then, in accord- 

 ance with the principles we have sought to establish, is the guidance which it can 

 ofter ? Are there any common beliefs which it may show to be superficially 

 founded? Few assertions certainly are more frequent than that the interests of 

 employers and employed are harmonious, and that disputes involve a disturbance 

 of this fundamental harmony. On the other hand, few facts are more obvious than 

 that employer and employed i-egard their interests as essentially antagonistic, and 

 from this antagonism the disputes have arisen. Economics is able to show that 

 either view expresses a portion, and only a portion, of the truth ; and, by the 

 systematic mould in which its reasoning is cast, it brings into clear relief the rela- 

 tion of the complementary truths. 



In the production of wealth the interests of the parties harmonise, for, with 

 the modern organisation of industry they require the services of one another, 

 and, the more efficient they respectively are, the larger is likely to be the wealth 

 produced. It is the interest of the employer that the wages earned by the men 

 should be adequate to maintain, and, if possible, to increase, their efficiency ; and it 

 is the interest of the employed that the profits of the entrepreneur should eucour- 

 age enterprise and induce a sufficient supply of capital. For production — and this 

 is a point which economics, and economics alone, can duly emphasise — is the ulti- 

 mate source of the wealth distributed. The larger the amount produced, the larger, 

 C(eterk paribus, is likely to be the share of either party in distribution ; and in any 

 event it is certain that a decreased production must issue in effects on distribution, 

 the burden of which will fall, though in varying measure, on either party. The 

 influence thus exerted on distribution by production is one which workmen seem 

 especially likely to forget, and many of the common arofuments in favour of ' making 

 work,' or providing ' employment for the unemployed,' proceed from ignorance or 

 neglect of this consideration. 



On the other hand, it may be urged that employers are not very keen to recog- 

 nise the influence, whether for advantage or drawback, of distribution on pro- 

 duction. No doubt the division of economics into separate departments tends to 

 make even the student forget their mutual connection. We do not remember 

 constantly that production and distribution are simultaneous, and are only dis- 

 tinguished for purposes of convenient analysis. Yet one of the most important 

 advances of recent economics consists in the emphasis given to the influence of 

 distribution on production; and we see more clearly than our predecessors how 

 the poverty of the poor, by begetting inefficiency, may cause their poverty, and 

 high wages may imply, not a high, but a low, cost of production. Either of these 

 truths may be puslied to excess ; but they are certainly fraught with important 

 consequences, and have an intimate bearing on the question before us. But, like 

 the influence of production on distribution, the telescope of the economist is needed 

 to bring and retain tliem within tlie range of ordinary vision. 



The full and constant recognition of these truths conduces to a more compre- 

 hensive conception of the possible results of industrial disputes. We can see, on 

 the one hand, that a victory for the moment may not prevent defeat in the long 

 run, and that loss, which is obvious at tlie time, may issue in ultimate gain. When 

 we remember that to discern these distant results the naked eve of the plain ob- 

 server seems incompetent without the aid of the economic organon, we are as ready 

 to recognise the likelihood of industrial conflict as we are anxious to devise the 

 means of preventing it. For in the distribution of wealth the apparent interests of 

 the two parties are antagonistic, and, given the amount produced, the larger 

 the share of the one, tlie less will be that of the other. The frank recognition of 

 this possible antagonism is the first step towards the prevention of its natural 

 consequences. The imminence of the possibility supplies the strongest motive for 



