On this point, therefore, Socialists have really made out the existence not only of a great evil, but of one which grows and tends to grow with the growth of population and wealth. It must be said, however, that society has never yet used the means which are already in its power of grappling with this evil. The laws against commercial frauds are very defective, and their execution still more so. Laws of this description have no chance of being really enforced unless it is the special duty of some one to enforce them. They are specially in need of a public prosecutor. It is still to be discovered how far it is possible to repress by means of the criminal law a class of misdeeds which are now seldom brought before the tribunals, and to which, when brought, the judicial administration of this country is most unduly lenient. The most important class, however, of these frauds, to the mass of the people, those which affect the price or quality of articles of daily consumption, can be in a great measure overcome by the institution of co-operative stores. By this plan any body of consumers who form themselves into an association for the purpose, are enabled to pass over the retail dealers and obtain their articles direct from the wholesale merchants, or, what is better (now that wholesale co-operative agencies have been established), from the producers, thus freeing themselves from the heavy tax now paid to the distributing classes and at the same time eliminate the usual perpetrators of adulterations and other frauds. Distribution thus becomes a work performed by agents selected and paid by those who have no interest in anything but the cheapness and goodness of the article; and the distributors are capable of being thus reduced to the numbers which the quantity of work to be done really requires. The difficulties of the plan consist in the skill and trustworthiness required in the managers, and the imperfect nature of the control which can be exercised over them by the body at large. The great success and rapid growth of the system prove, however, that these difficulties are, in some tolerable degree, overcome. At all events, if the beneficial tendency of the competition of retailers in promoting cheapness is fore-gone, and has to be replaced by other securities, the mischievous tendency of the same competition in deteriorating quality is at any rate got rid of; and the prosperity of the co-operative stores shows that this benefit is obtained not only without detriment to cheapness, but with great advantage to it, since the profits of the concerns enable them to return to the consumers a large percentage on the price of every article supplied to them. So far, therefore, as this class of evils is concerned, an effectual remedy is already in operation, which, though suggested by and partly grounded on socialistic principles, is consistent with the existing constitution of property.
With regard to those greater and more conspicuous economical frauds, or malpractices equivalent to frauds, of which so many deplorable cases have become notorious—committed by merchants and bankers between themselves or between them and those who have trusted them with money, such a remedy as above described is not available, and the only resources which the present constitution of society affords against them are a sterner reprobation by opinion, and a more efficient repression by the law. Neither of these remedies has had any approach to an effectual trial. It is on the occurrence of insolvencies that these dishonest practices usually come to light; the perpetrators take their place, not in the class of malefactors, but in that of insolvent debtors; and the laws of this and other countries were formerly so savage against simple insolvency, that by one of those reactions to which the opinions of mankind are liable, insolvents came to be regarded mainly as objects of compassion, and it seemed to be thought that the hand both of law and of public opinion could hardly press too lightly upon them. By an error in a contrary direction to the ordinary one of our law, which in the punishment of offences in general wholly neglects the question of reparation to the sufferer, our bankruptcy laws have for some time treated the recovery for creditors of what is left of their property as almost the sole object, scarcely any importance being attached to the punishment of the bankrupt for any misconduct which does not directly interfere with that primary purpose. For three or four years past there has been a slight counter-reaction, and more than one bankruptcy act has been passed, somewhat less indulgent to the bankrupt; but the primary object regarded has still been the pecuniary interest of the creditors, and criminality in the bankrupt himself, with the exception of a small number of well-marked offences, gets off almost with impunity. It may be confidently affirmed, therefore, that, at least in this country, society has not exerted the power it possesses of making mercantile dishonesty dangerous to the perpetrator. On the contrary, it is a gambling trick in which all the advantage is on the side of the trickster: if the trick succeeds it makes his fortune, or preserves it; if it fails, he is at most reduced to poverty, which was perhaps already impending when he determined to run the chance, and he is classed by those who have not looked closely into the matter, and even by many who have, not among the infamous but among the unfortunate. Until a more moral and rational mode of dealing with culpable insolvency has been tried and failed, commercial dishonesty cannot be ranked among evils the prevalence of which is inseparable from commercial competition.
Another point on which there is much misapprehension on the part of Socialists, as well as of Trades Unionists and other partisans of Labor against Capital, relates to the proportions in which the produce of the country is really shared and the amount of what is actually diverted from those who produce it, to enrich other persons. I forbear for the present to speak of the land, which is a subject apart. But with respect to capital employed in business, there is in the popular notions a great deal of illusion. When, for instance, a capitalist invests £20,000 in his business, and draws from it an income of (suppose) £2,000 a year, the common impression is as if he was the beneficial owner both of the £20,000 and of the £2,000, while the laborers own nothing but their wages. The truth, however, is, that he only obtains the £2,000 on condition of applying no part of the £20,000 to his own use. He has the legal control over it, and might squander it if he chose, but if he did he would not have the £2,000 a year also. As long as he derives an income from his capital he has not the option of withholding it from the use of others. As much of his invested capital as consists of buildings, machinery, and other instruments of production, are applied to production and are not applicable to the support or enjoyment of any one. What is so applicable (including what is laid out in keeping up or renewing the buildings and instruments) is paid away to laborers, forming their remuneration and their share in the division of the produce. For all personal purposes they have the capital and he has but the profits, which it only yields to him on condition that the capital itself is employed in satisfying not his own wants, but those of laborers. The proportion which the profits of capital usually bear to capital itself (or rather to the circulating portion of it) is the ratio which the capitalist's share of the produce bears to the aggregate share of the laborers. Even of his own share a small part only belongs to him as the owner of capital. The portion of the produce which falls to capital merely as capital is measured by the interest of money, since that is all that the owner of capital obtains when he contributes nothing to production except the capital itself. Now the interest of capital in the public funds, which are considered to be the best security, is at the present prices (which have not varied much for many years) about three and one-third per cent. Even in this investment there is some little risk—risk of repudiation, risk of being obliged to sell out at a low price in some commercial crisis.