Painite Radicalism, Spencerian Liberalism and the Origins of Hobson’s Thought
Hobson’s earliest critique of capitalism, and his first step on the way to becoming a welfare economist, involved an extension of the argument of the later Mill that rent of land was the ‘unearned increment’ and that land should be taxed as such, and open to purchase by public bodies.
Like the Fabians, Hobson claimed that monopoly power accruing to any factor of production produced rents which the state had the right and the duty, in an emergent democratic society, to appropriate and distribute (Hobson 1891). Rents could be earned by any factor of production but were now more likely to arise from the ownership of capital than from land. The whole of Hobson’s purely economic analysis of maldistribution of wealth, underconsumption, over-saving and imperialism can be derived from this early analysis of rent, as can the remedies he proposed for them. In Hobson's most complex piece of economic reasoning (Hobson 1910a) he divided costs of production into (a) costs of maintenance, which were those payments needed to keep existing factors of production in a state of stable equilibrium; (b) costs of growth, payments that would bring new factors into play or enhance the productivity of existing ones; and (c) the ‘unproductive surplus’ which was the result of privilege and monopoly power and was not only unnecessary to evoke growth but was also taken from other factors - principally labour - whose growth was thereby inhibited. The unproductive surplus could be redistributed by governments through progressive taxation without impairing economic growth (Hobson 1911). This was a radical, rather than a purely liberal, programme; and in assessing Hobson’s thought it is worth taking a look at the history of radicalism to put his ideas in a broader context than is provided by labelling him as an ‘Oxford’ welfare economist (Shionoya 2010).Although his crusade for free trade made Richard Cobden one of Hobson’s enduring heroes (Hobson 1918), from a purely economic standpoint, the radical voice closest to Hobson's own was Thomas Paine, though Hobson did not appear to be aware of it.
In the first half of the nineteenth century, the Painite radical movement developed against the backdrop of the vast government expenditures of the Napoleonic wars, which prompted radical attacks on the ‘Old Corruption’ of the aristocratic elites who ran the British state and inspired a movement for a small state and low taxation (Cain 1985; Thompson 1998). Cobden and Spencerboth espoused that cause. Paine, who admired Adam Smith, had, like them, attacked aristocratic privilege and monopoly and had championed the cause of capitalism and free international commerce as emancipating the common man. What, however, marked him out as different from them were his proposals for a welfare state, in part II of the Rights of Man (1791) and, especially, in Agrarian Justice (1797) (Paine 1987).In the latter work, Paine, who like Hobson believed in universal suffrage, based his claim for a redistribution of income on two main intellectual props. First, he argued that monopoly of land had taken away the ‘natural’ right that every man had to a share in it. He admitted that ownership by the few had increased productivity on the land so he did not propose to disturb that directly; rather he wanted to tax land and then compensate the masses for what they had lost through state payments which would include child benefits to promote education, old age pensions and support for the sick. Second, and of particular interest in the context of Hobson and the New Liberalism, Paine went on to consider all accumulations of wealth, not just those arising from land, and argued that modern capitalist society produced very marked inequalities in wealth. A new hereditary poor was being created which was dangerous to social stability. So there was a case to be made for redistribution on prudential grounds. Beyond that, Paine clearly believed that much wealth was gained without effort while the poor were often exploited, so that the distribution of wealth was unjust. So, again, he argued for progressive taxation to bring about equality of opportunity through government as the representative of democracy (Philp 1989, 84-93).
Hobson, like the other New Liberals including the members of the progressive think tank, the Rainbow Circle, were well aware of Paine as a revolutionary political force but none of them seem to have been familiar with the way that he had approached the question of economic welfare (Rainbow Circle 1989, 96-8; Hobson 1910b). In fact, Paine had anticipated Hobson's crucial idea of an unproductive surplus, and he also thought, as did Hobson, that part of what was produced was always a social rather than a purely individual product. So even had there ever existed a society so perfectly competitive that no unproductive surplus was generated, a part of what was produced would always be a social product, and the state, as the representative of democratic society, would have the right to take it and use it for public purposes (Hobson 1910a, 81; Allett 1981, ch. 3). In looking back at radical predecessors such as Cobden and Spencer, whose focus was mainly on eradicating aristocratic privilege, Hobson would have seen himself as making a mighty shift from ‘negative' to ‘positive' liberty (Berlin 1969) whereas, in fact, he was unwittingly reviving a long- forgotten radical programme.
However, it is also important to note that, by the time his economic thought had matured, the core economic argument was interwoven with different strands of thought which shifted its emphasis away from the simple notion that a redistribution of income and wealth in favour of the poor was all that was needed to create a better society, and towards a more qualitative assessment of welfare. However, despite his Oxford education, T. H. Green and his followers probably had less influence on Hobson in this regard than the self-educated Herbert Spencer (Taylor 1992). Hobson agreed that he took something from the ‘atmosphere' of Green's Oxford though it had no immediate impact on him, whereas he claimed reading Spencer's Study of Sociology as a teenager had a ‘profound influence' on him (Hobson 1976,23, 25; Freeden 1988, 60-4).
It is also the case that much of Hobson's analysis of the social problem was set within a framework of Spencerian biologism in which the social organism was declared to be healthy or unhealthy depending on the degree to which its members were parasitic, and consumed too much for their own good, or were underfed and therefore undeveloped (Freeden 1976). Admittedly, some of Hobson's increasing stress on the importance of qualitative forms of welfare was also a product of a liberal- evolutionary train of thought that ran through Green and L. T. Hobhouse. He argued, against Benjamin Kidd and other Social Darwinists, that the competitive struggle amongst humans would in future take place more on the non-material plane than the physical; it was becoming a battle between ideas rather than one of crude economic and military strength, and was reaching the point where men could exercise a conscious control over their environment rather than blunder blindly down a Darwinian evolutionary path (Hobson 1895). Again, however, he was probably as much influenced in this direction by Spencer as by his Oxford connections since the former looked forward to a time far ahead in which work would be for life rather than life for work, and when the current individualist striving would give way to the pursuit of the common good (Spencer 1972,260-3; Taylor 1992). Hobson's debt to Spencer is evident, too, in the fact that the latter's distinction between traditional ‘militant' societies - which were warlike and enforced ‘compulsory co-operation' through the state and high taxation - and the new ‘industrial' societies - based on ‘voluntary co-operation' through the market system and naturally peaceful and prosperous - became a key part of Hobson's own mature thinking (Spencer 1972, 149-66).However, the argument here is that the biggest single influence moving Hobson in the direction of a qualitative assessment of wealth and welfare was not Spencer but the illiberal John Ruskin. Even if judged from a purely quantitative perspective, Hobson's concept of surplus, and the rejection of marginal analysis that it implied, would have distanced him from Pigou and the Cambridge school discussed in this book. But Hobson was also determined to put his reasoning in an ethical, qualitative frame; and Ruskin was the key figure in guiding him in that direction from the early 1890s onwards, as will be seen (Hobson 1894; Hobson 1976, 41-2).
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