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J. S. Mill's Liberal Utilitarian Assessment of Capitalism Versus Socialism

Published online by Cambridge University Press:  26 January 2009

Jonathan Riley
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Extract

John Stuart Mill argued, in his Principles of Political Economy (1848, 7th edn., 1871), that existing laws and customs of private property ought to be reformed to promote a far more egalitarian form of capitalism than hitherto observed anywhere. He went on to suggest that such an ideal capitalism might evolve spontaneously into a decentralized socialism involving a market system of competing worker co-operatives. That possibility of market socialism emerged only as the working classes gradually developed the intellectual and moral qualities required for worker co-operatives to succeed against private firms. Workers would tend to reject the hierarchical wage relation as they developed the requisite personal qualities, he believed, and capitalists, facing escalating wages for skilled labour as a result of the diminishing supply of high-quality workers for hire, would tend to lend their capital to the worker co-operatives ‘at a diminishing rate of interest, and at last, perhaps, even to exchange their capital for terminable annuities. In this or some such mode’, he speculated, ‘the existing accumulations of capital might honestly, and by a kind of spontaneous process, become in the end the joint property of all who participate in their productive employment: a transformation which, thus effected, (and assuming of course that both sexes participate equally in the rights and in the government of the association) would be the nearest approach to social justice, and the most beneficial ordering of industrial affairs for the universal good, which it is possible at present to foresee.’

Type
Research Article
Information
Utilitas , Volume 8 , Issue 1 , March 1996 , pp. 39 - 71
Copyright
Copyright © Cambridge University Press 1996

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References

1 Mill, J. S., Principles of Political Economy (henceforth POPE), ed. Robson, John M., 2 vols., Collected Works of J. S. Mill (henceforth CW), Toronto, 1965, iii. 793–4Google Scholar.

2 Hollander, Samuel, The Economics of John Stuart Mill, 2 vols., Toronto, 1985, ii.817–18Google Scholar. Hollander takes the quote from Mill's, Chapters on Socialism, in Essays on Economics and Society, ed. Robson, John M., Toronto, 1967Google Scholar (henceforth COS), reprinted in CW, v.743.

3 Autobiography, in Autobiography and Literary Essays, ed. Robson, John M. and Stillinger, Jack, Toronto, 1981 (henceforth AUTO), CW, i.239Google Scholar.

4 Among those who emphasize that Mill ultimately converted to socialism are Heilbroner, Robert, The Worldly Philosophers, New York, 1962, p. 127Google Scholar; and Schumpeter, Joseph, History of Economic Analysis, New York, 1954, pp. 531–3Google Scholar. Stephen, Leslie even claims that Mill was ‘well on his way to State Socialism’ (The English Utilitarians, 3 vols., London, 1900, iii.230)Google Scholar, a claim properly dismissed by Schwartz, Pedro (The New Political Economy of J. S. Mill, Durham, 1971, p. 154)Google Scholar, as inconsistent with Mill's general presumption in favour of laissez-faire. Mill emphasized that central planning would be a highly impractical way to go about organizing production (COS, CW, v.738).

5 POPE, CW, ii.214.

6 Among those inclined to this interpretation, see Robbins, Lionel, The Theory of Economic Policy in English Classical Political Economy, London, 1952, pp. 142ffGoogle Scholar; Losman, D. L., ‘J. S. Mill on Alternative Economic Systems’, American Journal of Economics and Sociology, XXX (1971), 85–104CrossRefGoogle Scholar; and Schwartz, esp. pp. 190–2. Schwartz seems to accept Lord Robbins's assertion that Mill favoured a form of syndicalism rather than state socialism (ibid., p. 192). But, as Hollander suggests, it is doubtful that Mill had syndicalism in mind, ‘if by that term is meant a combination of all workers throughout society engaged in a particular occupation’ such that the unions seek to gain control (though not necessarily ownership) of the means of production for their respective trades by means of general strikes. Rather, Mill seems to have ‘envisaged … the organization of individual productive establishments within each industry as co-operative associations – precluding a separate body of workers distinct from a capitalist (or group of capitalists in the joint-stock case) where each association would be independent of, and in competition with, similar associations in the same industry (or with capitalist firms if the system was not a universal one’ (Hollander, ii.813).

7 From a Marxist perspective, Mill might be seen as a strategic apologist for bourgeois values, slyly paying lip service to socialist ideals while using his growing influence with working class leaders to discourage the overthrow of the system of private property any time soon.

8 Thomas, William, Mill, Oxford, 1985, p. 90Google Scholar.

9 See, for example, Himmelfarb, Gertrude, On Liberty and Liberalism: The Case of J. S. Mill, New York, 1974, pp. 125–39Google Scholar. Like Leslie Stephen, Himmelfarb claims that Mill ‘came close to abandoning’ laissez-faire in favour of socialism and communism, as if socialism and communism were inconceivable without centralized state planning. Similarly, William Thomas, in the passage quoted earlier in the text, is clearly responsible himself for at least part of the frustration he evidently feels over Mill's view. Note his conflation of private property with laissez-faire, as if limited government were conceivable only in the context of a capitalist economy.

10 See, for example, Hayek, Friedrich, Law, legislation, and liberty, 3 vols., Chicago, 1973–1979Google Scholar; and Nozick, Robert, Anarchy, State and Utopia, Oxford, 1974Google Scholar.

11 POPE, CW, ii.200–1.

12 See ibid., 245–336.

13 For relevant discussion, see Arnold, N. Scott, The Philosophy and Economics of Market Socialism, Oxford, 1994, pp. 3–11, 43–9Google Scholar; and Roemer, John, Egalitarian Perspectives, Cambridge, 1994, Pt. I, esp. pp. 15–36, 104–11CrossRefGoogle Scholar.

14 On Liberty, Essays on Politics and Society, ed. Robson, John M., Toronto, 1977 (henceforth OL), CW, xviii.227Google Scholar. For Mill's discussion of Comte's socialistic scheme of spiritual despotism, see ‘August Comte and Positivism’, Essays on Ethics, Religion and Society, ed. Robson, John M., Toronto, 1969, CW, x. esp. pp. 314–15, 326–7, 344–59Google Scholar.

15 COS, CW, v.737–8, 748–9.

16 Ibid., 737.

17 Ibid., 746–7.

18 Ibid., 738.

19 POPE, CW, ii.203, 210Google Scholar; COS, CW, v.739. The famous Marxist formula ‘that all should work according to their capacity, and receive according to their wants’ is attributed to Louis Blanc and said to be ‘a still higher standard of justice’ than the simple equality of communism.

20 Mill's terminology has been criticized for some time by commentators unable or unwilling to disassociate socialism from state ownership and control of the means of production.

21 POPE, CW, ii.208.

22 Utilitarianism (henceforth UTIL), CW, x.250–1.

23 Ibid., 240–59.

24 CW, xvii.1739–40.

25 COS, CW, v.750; POPE, CW, ii.208, 215.

26 Hollander, ii.650.

27 Ibid., 663.

28 Ibid., 663–8.

29 Ibid., 605, 638–68.

30 See, e.g. Berger, Fred, Happiness, Justice and Freedom, Berkeley, 1984Google Scholar; Gray, John, Liberalisms, London, 1989, pp. 120–39, 217–38Google Scholar; and Skorupski, John, John Stuart Mill, London, 1989, pp. 283–388Google Scholar.

31 See Riley, J., Liberal Utilitarianism, Cambridge, 1988Google Scholar; and Riley, A Liberal Utilitarian Theory of Justice, forthcoming.

32 It must be admitted that Mill does not always give security lexical priority over other values. See, e.g. POPE, CW, iii.880–6. But, in my view, the weight he generally assigns to it is such that lexical priority provides a reasonable interpretation of his approach. See, e.g. UTIL, CW, x.250–1, 255–6, 259Google Scholar; and Rawls, John, A Theory of Justice, Cambridge, Mass., 1971, pp. 42n–3, 122–6, 315–25, 501–2Google Scholar.

33 The existing rules may be assumed to determine virtually every person's preferences relating to security, in other words, their choices among alternative distributions of rights. Thus, utilitarian aggregation of those preferences would merely yield the existing system of rules in that context.

34 General security is perfected only if virtually everyone develops preferences for rules of equal justice and thus for the ideal security-preferences shaped by such rules. For that to happen, at least a few persons must be able to imagine an equal distribution of rights prior to the establishment of the relevant rules and then somehow persuade most of their fellows to suitably alter their non-ideal preferences which have been moulded under the existing non-ideal rules. As discussed later in the main body of the text, the instrument of fair compensation is crucial to this process of preference change underlying the perfection of general security.

35 See Riley, , ‘“One Very Simple Principle”’, Utilitas, iii (1991), 1–35CrossRefGoogle Scholar.

36 OL, CW, xviii.293.

37 Without pretending to lay down any simple universal principle, Mill defends a general policy of laissez-faire with respect to economic activities: ‘Laisser-faire … should be the general practice: every departure from it, unless required by some great good, is a certain evil.’ But significant ‘departures’ from the general policy are also said to be expedient. See POPE, CW, iii.936–71.

38 As security is perfected, each person enjoys increasing protection in the full exercise of the right to liberty in purely self-regarding matters. Exercise of that right is equivalent in Mill's view to individuality or self-development (OL, CW, xviii.260–75).

39 See, for example, Harrison, Ross, Bentham, London, 1983Google Scholar; Rosen, Fred, Jeremy Bentham and Representative Democracy, Oxford, 1983Google Scholar; Rosen, , ‘Bentham and Mill on Liberty and Justice’, in Feaver, G. and Rosen, F., eds., Lives, Liberties and the Public Good, London, 1987, pp. 121–38CrossRefGoogle Scholar; Postema, G. J., Bentham and the Common Law Tradition, Oxford, 1986Google Scholar; and Kelly, P. J., Utilitarianism and Distributive Justice: Jeremy Bentham and the Civil Law, Oxford, 1990Google Scholar.

40 For clarification of Bentham's conception of the general welfare in terms of these four components, see, e.g. Harrison, , Bentham, pp. 244–62Google Scholar; and Kelly, pp. 73–94, 104–31.

41 Bentham, , ‘Principles of the Civil Code’, The Works of Jeremy Bentham, ed. Bowring, John, 11 vols., Edinburgh (hereafter Bowring), 1838–1843, i.302Google Scholar; as quoted by Kelly, p. 73.

42 Kelly, p. 74. Kelly tends to argue that Bentham's utilitarian account of justice in terms of general security is superior to Mill's similar account (ibid., pp. 7, 109 n.17, 205–6, 218).

43 Ibid., p. 84.

44 Ibid., p. 128.

45 ‘Principles of the Civil Code’, Bowring, i.303; as quoted by Kelly, p. 107.

46 Bentham, in the passages quoted by Kelly (ibid., pp. 112–13), mentions a guarantee only for the fruits of labour as opposed to labour and saving. Kelly seems to interpret this to imply that, for Bentham, , there was no right to a return on capital: ‘[I]n the long term all unearned benefits [might be redistributed], even those which are a return on capital’, (p. 127Google Scholar, emphasis added). But Bentham may not have meant to exclude a legitimate reward for capital, given that capital goods are themselves the fruit of labour. Indeed, in his Defence of Usury [1816], he agrees in effect with Mill that a return on capital is legitimately earned for abstinence, risk, and/or managerial efforts on the part of investors.

47 On Bentham's view that poor relief must be provided in such a way as not to encourage idleness at the expense of productive efforts, see Kelly, pp. 114–31.

48 Ibid., p. 125

49 POPE, CW, iii.756.

50 Kelly, p. 103. Kelly suggests, however, that Bentham may have anticipated Mill's famous principle of liberty (ibid., pp. 150–4).

51 POPE, CW, iii.756.

52 Ibid., 755.

53 For Bentham's view, see Kelly's discussion of what he calls Bentham's, ‘disappointment-preventing principle’ (Kelly, pp. 168–206)Google Scholar. Kelly, emphasizes that the ‘disappointment-preventing principle … is largely concerned with extending access to property … while protecting those expectations which are derived from the existing distribution of property rights … [It] enables the Benthamite legislator to pursue a policy of the substantial equalization of property holdings while also respecting the pattern of expectations embodied in the existing distribution of property’, pp. 8–9Google Scholar. Mill clearly recognizes a similar principle. See, e.g. UTIL, CW, x.242–3, 247–8, 256Google Scholar; POPE, CW, ii.230–3; COS, CW, v.753; and Riley, Liberal Utilitarian Theory of Justice. He apparently intended to offer a full discussion of the principle in his ‘Chapters on Socialism’ but did not live to complete the task.

54 Fair compensation is due to an owner for any taking of property by the state but, as Mill makes clear, every legal reform does not amount to a taking. Individuals do not hold title to ‘confessedly variable’ general taxes or tariffs, for example, and thus cannot claim compensation for changes in those institutions (with the caveat that such changes cannot apply retroactively). The line between a taking of property and a reform with incidental effects on the distribution of property is not always easy to draw, however. If the state has never exercised its power to tax estates or resource rents, for example, or has left taxes fixed for generations, then existing property owners may have some moral claim for compensation if taxes are reformed. See POPE, CW, ii.217–18, 230–3; iii.819–22Google Scholar.

55 See, e.g. ibid., iii.819–22, 868. More generally, for Mill's principles of fair taxation, see ibid., pp. 805–72. With the caveat that all persons should be legally guaranteed a basic income exempt from taxation, he generally argues for proportional taxation of any surplus income earned from one's own labour and saving under competitive conditions, and for sharply progressive taxation of all unearned surplus income including gifts, inheritances, resource rents, and the like.

56 Ibid., ii.402.

57 Ibid., 402–3. Mill does not seem to think that much variation in ordinary management skills exists across social contexts.

58 Ibid., 162–4.

59 Ibid., 163.

60 Ibid., 403.

61 Ibid., 736–7.

62 Recall that the minimum profit rate in any given social context does not include any rewards for what is considered in that context to be extraordinary abstinence, risk-taking or management skills.

63 Given existing customs governing the minimum profit rate in any society, we might say that general security in that social context is maximized when the ordinary profit rate falls to the customary minimum rate. But customs undergo improvement under the progress of civilization to liberal utopia. As development proceeds, the minimum profit rate falls to its lowest possible (or infimum) rate and the maximum level of general security rises to its highest possible (or supremum) level.

64 Ibid., 162–3, 736–7.

65 For further discussion, see Duncan, G., Marx and Mill, Cambridge, 1973Google Scholar.

66 POPE, CW, ii.208, iii.794–5.

67 Ibid., ii.208, emphasis added.

68 Ibid., 207.

69 Ibid., 207–8.

70 Ibid., 208, 215.

71 COS, CW, v.715.

72 Ibid., 714.

73 Ibid., 715. Note Mill's implicit appeal to a science of ethology for a ‘minuter analysis’ of ‘the filiation which connects’ character faults and bad conduct ‘with a defective organization of society’.

74 Ibid., 727.

75 Ibid., 727–36; POPE, CW, iii.794–6.

76 COS, CW, v.742–3.

77 Ibid., 731–3.

78 Ibid., 732–3.

79 Ibid., 733. See also POPE, CW, iii.906–12.

80 Ibid., 755.

81 Ibid., ii.227–32, iii.819–22, 868.

82 Ibid., iii.755. See also ibid., ii.218–26, iii.887–95.

83 For further discussion of the desert principle of distributive justice associated with capitalism in its best form, see Riley, J., ‘Justice Under Capitalism’, in Markets and Justice: Nomos XXXI, ed. Chapman, J. and Pennock, J. R., New York, 1989, pp. 122–62Google Scholar, and references cited therein.

84 POPE, CW, ii.209.

85 COS, CW, v.746.

86 POPE, CW, iii.795.

87 Ibid., 755. See also COS, CW, 749–53Google Scholar.

88 POPE, CW, iii.794.

89 For discussion of Fourier's scheme of decentralized socialism, see Beecher, J., Charles Fourier: The Visionary and His World, Berkeley, 1986Google Scholar; Beecher, J. and Bienvenu, R., The Utopian Vision of Charles Fourier, Boston, 1971Google Scholar; Guarneri, C. J., The Utopian Alternative: Fourierism in Nineteenth Century America, Ithaca, 1991Google Scholar; and Riasanovsky, N. V., The Teaching of Charles Fourier, Berkeley, 1969Google Scholar.

90 In On Liberty, Mill discusses this problem of mass conformity at length and proposes to remedy it through a package of various measures. These include: legal enforcement of the individual's right to choose as he likes with respect to purely private matters such as his ideas on all subjects, his intimate lifestyle, and so on; a programme of national education designed to promote tolerance of what others choose in such private matters; and active government support for social pluralism. The last policy might include special subsidies for intellectual and agricultural classes within a predominantly commercial society, for example, as well as suitable immigration measures.

91 POPE, CW, iii.758–96. Mill also indicates that a just society would make exceptions for ‘those unable to labour, or who have fairly earned rest through toil’ (ibid., 758).

92 Ibid., 793.

93 Ibid., 769.

94 Ibid., ii.163–4, iii.737–8.

95 COS, CW, v.739–45, 748–9. See also POPE, CW, ii.203–5, 210–14Google Scholar.

96 COS, CW, v.743–5 POPE, CW, ii.206–7.

97 In general, my view accords with that of Hollander as I interpret him (Hollander, ii.770–912). He is exceptional in his emphasis that ‘on the whole there was little change in Mill's position over time’ (ibid., 808).

98 Various schemes are discussed by, among others, Nove, Alex, The Economics of Feasible Socialism, London, 1983Google Scholar; Dahl, Robert, A Preface to Economic Democracy, Berkeley, 1985Google Scholar; Le Grand, Julian and Estrin, Saul, eds., Market Socialism, Oxford, 1989Google Scholar; Miller, David, Market, State, and Community, Oxford, 1990CrossRefGoogle Scholar; Schweickart, David, Against Capitalism, Cambridge, 1993Google Scholar; Roemer, John and Bardhan, Pranab, eds., Market Socialism: The Current Debate, Oxford, 1993Google Scholar; and Roemer, John, A Future for Socialism, Harvard, 1994CrossRefGoogle Scholar. The modern example of former Yugoslavia is discussed by Estrin, Saul, Self-Management: Economic Theory and Yugoslav Practice, Cambridge, 1983Google Scholar, and by Lydall, H., Yugoslavia in Crisis, Oxford, 1989Google Scholar. The ongoing experiment with self-managed worker co-operatives near the town of Mondragon in northern Spain is discussed by Thomas, H. and Logan, C., Mondragon: An Economic Analysis, London, 1982Google Scholar.

99 Roemer, , Future for Socialism, esp. pp. 46–84Google Scholar.

100 Foreign investors would be permitted to buy stocks with currency, in which case domestic investors must be prevented from using foreigners as brokers. Even so, coupon prices are implicitly linked to money values.

101 Ibid.

102 Ibid., pp. 76ff.

103 For a more general critique of market socialism, see Scott Arnold, Philosophy and Economics of Market Socialism.