Rise and Decline of the Profit Motive
It is often argued that one cannot have a new and better society, that private ownership of the means of production cannot be overcome, that socialism is impossible, because human nature is what it is, implying, of course, a not too complementary appreciation of that nature.
Thus in the drama of progress come to be regarded as the villain of the piece. As long as one cannot change human nature, there is no possibility changing society.
Now, I do not wish to idealise human nature. I could not deny for instance that much of the crime and violence that we meet are attributable not only to our institutions functioning badly, but also to the institutions themselves on account of man’s being as he is.
In effect I would assume that man has a mixed nature, with a great variety of preformed motives, and either good or bad would be ____do violence to the other half, bad or good, respectively.
But, fortunately, it is not about such a broad, and somewhat vague, issue we are called to decide whether man is selfish or selfless, cruel or humane, tolerant or intolerant, rational or emotional, and similar generalities which might easily involve us in a discussion of original sin or other doctrinal matter. We will beware of trespassing …on theology…
All we are concerned with is whether our present economic system is as firmly rooted in man’s nature can open the way for a change in that system.
Is it true that the way in which we ensure the production and distribution of goods and services appeals to the only motive which will make individuals participate in these economic activities, namely the prospect of private gain or at least that the avoidance of hunger and privation? That but for the threat of hunger the average man would not work? In other words interest, the lure of material benefit, the fear of material privation.
The answer is No. An economic system which appeals to fear of privation as the individuals motive of participation in the work of production, is comparatively very recent. Never in all known history was society organized in this peculiar fashion. And all signs point to a change back from such a profit-economy to more normal and human forms of life in the near future.
1. The threat of hunger is introduced
In 1532 the Spanish Humanist Vives published a book in Lyon in France On the relief  of the poor, in Latin. It was written in 1524, and addressed to the Magistrates of the Flemish city of Bruges, who had consulted him on the subject. The author suggested that the indiscriminate relief of the poor as practiced by the churches and monasteries was pernicious, for it failed to distinguish between the deserving poor, the genuinely needy on the one hand, the work-shy and malingerers on the other. Since times immemorial the monasteries had taken upon themselves the care of the poor; actually no less than one third of diocesan revenue was supposed to be dedicated to that purpose. The underlying assumption was that there was a place for every human being in Christian community.
Vive’s pamphlet seemed to embody a starkling principle, that of discriminating amongst the poor. Accordingly, the matter was referred to the highest academic authority of the Christian world, the Sorbonne in Paris[.] This was only a few years after Luther had started the Reformation which involved an attack on monastic institutions. Vives it was thought might have been infected by heresy and his critique of monastic charity might due to doctrinal aberrations. The municipal authorities thought it right to keep on the safe side, and to ask for the advice of the Christians ____ before proceding further.
The Sorbonne found no fault with the thesis of the Humanist philosopher and agreed that poor relief might distinguish between the various kinds of indigents, provided sand the Sorbonne that no one was allowed to starve, since that would be contrary to the Christian community.
The Dutch Poor Law of 1531 embodied similar principles to those advocates by Vives. It was for a long time assumed that Vives visited England and was responsible for henry VIII poor law legislation, which started in 1536. However, this seems doubtful. The fact re amins and that for almost exactly three centuries the English Poor Law continued to embody the idea that the poor should not be indiscriminately cared for as in the past, but that they should nevertheless be a public charge since the community was responsible for looking after every one of its members. At the same time ______ _ ________ was published.
It was exactly two hundred and fifty years later, in 1786, that the idea was mooted that the poor laws should be abolished altogether, and the threat of hunger be let lose upon the poor. It is worth registering how this happened. Joseph Townsend, to whom the invention was due, put the paradigm of the goats and the dogs.
On the island of Juan Fernandez, he said, Buccaneers had landed a few goats to supply them with meat on their occasional visits. The goats multiplied at a great rate, and the pirates had a plentiful supply. The Spanish authorities of Chile had the brilliant idea of landing a dog and a bitch, who also multiplied at a biblical rate, since there was plenty of goats to feed on. The goats fled to the rocky parts of the island, where the dogs could not easily follow; only the dogs and the nimblest goats survived; but ultimately a balance  was achieved, limiting the number of goats and dogs to the appropriate figure. Townsend contended that the order which was maintained on this island was due to the all powerful lord Hunger. From this he deduced a maxim of the utmost importance. He wrote:
“Hunger will tame the fiercest animal, it will teach deceny and civility, obedience and subjection, to the most perverse. …hunger is not only peaceable, silent, unremitting pressure, but as the most natural motive to industry and labour, it calls forth the most powerful exertions…”
This was a startlingly new idea and it was on this idea that Nineteenth Century economic system was based.
In 1834, the famous Poor Law Amendment, was carried. It abolished over night the Poor Law which had been in force for three centuries. Disraeli, a conservative, denounced this as an inconceivable revolution: it was put into effect with a radicalism which makes non-sense of the cant phrase of British gradualism (a later invention). Outdoor relief was abolished and the workhouse erected as a place of mental torture and moral degradation. As long as man had power over his body he would prefer to labour at any wages and under any conditions rather than repair to this abode of shame. At one stroke, a society had been established, in which an economic system organized labour as a competitive labour market kept in action through the perpetual threat of starvation.
With 1834 begins the new era of industrial individuals civilisation, in which it is taken for granted that material needs are the natural motive of labouring. Thus was the free competitive labour-market created, labour made into a commodity and at the same time a new psychology foisted upon the population. Since workers were now made to offer their labour on the market, under the pressure of material want, it was easy to persuade them that this was a natural state of affairs. Indeed, that any other economic system than one which made want-satisfaction the motive of the individual [f]antastic[ally] utopian.
2. Labour in normal human society is not performed under the pressure of material want-satisfaction
Labour in human society is secured many ways. Custom and tradition, law and compulsion create the kind of social obligation which ensure that the job is done. The idea that he does not work neither shall he eat, is not principle of primitive society.
It was often believed that man’s economy started out with a stage in which he has to cater for himself and his family: hunt, collect, dig for his food. This view has been disproved by recent research. Nowhere under primitive conditions do we meet the individual household, the individual hunter, fisher, shepherd or agriculturalist. [Most of the] iably economic activity is collective, hunting, gardening, grazing, are done by the tribe or the group as such.
It would been plausible to imagine the individual who is a member of a  hunting-party or fishing-crew or team of cattle a band of [deserts], or group of gardeners, as best he can for fear that he may otherwise be left without a share in the game or the catch or the crop or the flock.
Now, it is most definitely established that the member of a savage tribe has his share in the food camp fire whether he has shared the joined effort or not. The labour and effort of the individual is dissociated from his rights as a member of the tribe. Under the Kraal-land system of the Kaffirs; for instance, destitution is impossible: “whosoever needs assistance, received it unquestioningly” (Mair. L.P. An African people in the 20th century. 1934). No Kwakiutl ever ran the least rick of going hungry. (Loeb E.M. In Essays in Anthropology. 1936). Herskovits. M. In the ‘Economic life of primitive Peoples’. 1940, says “there is no starvation in societies living on subsistence margin”. The principle of freedom from want was acknowledged in the Indian village community and, we might add, under almost every and any type of social organization up to about the beginning of the sixteenth century Europe, when the modern ideas on the poor put out by Vives were argued before the Sorbonne. It is this absence of the threat of individual starvation which makes primitive society, in a sense, more human than market-economy, and at the same time less economic. Ironically, the white man’s initial contribution to the black man’s world mainly consisted in introducing him to the uses of the scourge of hunger. Thus the colonist may decide to cut the breadfruit trees in order to create an artificial food scarcity or he may impose a hut-tax on the natives to force them to barter away their labour.
You see what happens? In order to establish a labour market, the fear of hunger must be made actual and real. The primitive safeguards against the individuals fear of starvation must be removed, otherwise the goad of hunger cannot reach the labourer-to-be.
In a primitive society this happens by depriving a man of his right in the land, in a modern society it happens by stopping out-door relief, as it was done, 1834.
The fear of hunger and starvation is, of course, an ever present consideration in the life of primitive society, and indeed of all-society. But the organization of society is such as to remove this fear from the individual, so that his economic activity should not be due to that fear but to other motives, equally stringent.
A parallel: just because hunger and sex are the two strongest motives swaying the individual, and no society could exist which does not ensure material survival and progeniture, neither is the economic system based directly on the individual motive of hunger is the great institution of the family directly based on the sex urge. That urge is intermittent and unstable; it could not be made the permanent motive for the keeping of the family, for the provision of the family home, for the upbringing of the children to ____. These are maintained by a number of motives approved by society, and they result in the maintenance of institutions [as] marriage and family. Although no family organisation is conceived that does not satisfy the sex-urge, no family is pointed which is baged directly, or even exclusively on that urge.
 Similarly in the can of the production and distribution goods. The purpose of the economic institution is undoubtedly to stave of need and privation; but the motive of the individual partaking in it, need not to be that motive: actually, it is the motive of social duty, of the enjoyment of common effort, the joy of craft of emulation, the give and take which is ensured by it, but mainly the appreciation of the social status involved in the performance of what a man is expected to do. Thus the economic system is maintained for the collective purpose of providing the members of society with the necessaries of life. But the motive which make the individual play his part in that system is not the fear of want (although this also may play its part in his motivation) but a whole set of other motives no less potent.
3. In conclusion: a change back seems to be impending
It is mere ignorance to argue that the present economic system is based on history or the nature of man, as revealed in history.
Adam Smith’s propensity of man to barter, truck and exchange, is plainly apocryphal. Primitive man’s seems to abhor bartering. And where it is introduced it, is usually an exchange of conventional values, i.e., at traditional rates. As for instance two bonite hooks against a big mat. The element of higgling and haggling does not enter at all.
The profit motive is on the decline. It has led to mass unemployment and to unemployment of our tools and machines. Unless we control our economy and plan our lives, we are in danger of starving. For hardly more than a century (1834-1933) it was made into a general incentive in economic life. In the future man will return to more natural motives of action which harmonise better with mixed nature. Competition and gain are too artificial foundations for our present highly developed economy. Our industrial society will have to revert to the traditional bases of life in human communities. The decline of the profit motive will thus be the beginning of social co-operation in all its forms. We must cease calumniating human nature. In this sense the co-operative movement may regard itself as the pioneer of a new industrial society.
John Maynard Keynes commenting on unshakable Victorian confidence in gift edged securities, said that anything that has been regularly happening for two generations tends to be regarded by men as the law of nature.
This applies perfectly to views on the profit motive. Since for some four or five generations it has been undoubtedly present to an important extent in men’s economic activities, the effectiveness of that motive has come to be regarded as something akin to a law of nature. To speak of the rise and fall of the profit motive will [be] seen to many people as nonsensical as to discuss the rise and fall of the law of gravitation. Some might regard such talk as almost sacrilegious, since they have come to associate in their thoughts the profit motive with the Divine scheme of things.
In truth, man is a creature of mixed motives and no one motive ever determines his actions in the field of human behaviour. Gain is certainly only one of a large number of motives which act as an incentive to man in production.
Actually, the term “gain” is hardly applicable outside a money economy, i.e. an economy where everything is being bought and sold. A medieval farmer, o for that matter any landowner, unless he lives in a commercialised economy, tends to think in terms of welfare rather than that of gain. His motive is note that of making as much money as possible, but rather that of improving his house, his garden, his cattle, his crops, his domestic outfit, his carriages, his horses and every appurtenance of his wellbeing from the cradle of his offspring to the family vault. He is primarily out for social recognition, not for an increase in money income; and he stands to lose in social recognition by using wrong methods in carrying on his farm or business, rather than by having less income. Consequently, his actions are directed more towards the increases of his social standing than towards maximum profits.
Indeed, it is very doubtful whether we ourselves, in our commercialized economy would aim towards maximum money incomes, but for the fact that our social standing in the community, with our neighbours and colleagues, depends upon our financial status. In other words, above a definite income level, money is made not so much on account of the leisure and luxuries which it will buy as on account of the social position which it ensures to those who make the money.
This, in effect is the general truth, that the individuals’ economic activities are not usually due to either to the profit motive, or to the fear of hunger and privation, but to a quite different set of motives, which is powerful enough to ensure that the necessary work is done.
At present, of course, the general rule is the opposite: most of the work done is being done because otherwise there is danger of hunger or privation. This is the essence of the wag system. Social security may somewhat alter this in the future. But take our world without “Beveridge” and it still remains true that fear of privation for oneself, and even more for ones family, is the prime motive men in their capacity as producers.
Two questions arise:
(1) Is fear of privation identical with the motive of gain? If we declare ourselves ready to work for wages because otherwise we right have to suffer privation, are we therein actuated by the profit-motive?
(2) And if, as we suggest, the answer should be in the negative, then not the profit motive but fear of hunger and privation would appear as the chief motive of man in his producer’s capacity. But is it our experience down the ages that the main motive of men to take part in production was the fear that they would otherwise have to go without food or be in some other way exposed to privation?
Again, our answer must be in the negative: although human societies run their economic systems for the purpose of fending off starvation, the motive of the individual members of society need not be that fear.
This brings us to the history of the profit motive: a society in which fear of hunger is the stimulus to work is a quite recent development. Not before the 16th century was such an idea seriously contemplated. And not before the Poor Law Amendment Act of 1834 was it put into practice.
Ancient societies the main motive of economic activity is social approbation, apart from the lesser, but still potent incentives of the team-spirit, competition and emulation, as well as reciprocity and the joy of work.
The profit motive is on the decline. For hardly more than a century (1834-1933) it was made into a general incentive in economic life. In the future man will return to more natural motives of action which harmonise better with mixed nature. Competition and gain are too narrow foundations for our present highly developed economy. Our industrial society will have to revert to the traditional bases of life in human communities. The decline of the profit motive will thus be the beginning of social co-operation in all its forms.
In the sense the Co-operative Movement may regard itself as the pioneer of a new society.
Original Publication: “Rise and Decline of the Profit Motive” – London Co-operative Society Weekend School - Notes, 1945
KPA: 17/24 (x p.)
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