World Economy

LECTURE III

Dornach, 26^th July, 1922.

LADIES AND GENTLEMEN,

In Economic Science, as I explained yesterday, it is essential to take hold of something that is for ever fluctuating — namely: the circulation of values and the mutual interplay of fluctuating values in the forming of Price. Bearing this in mind, you say to yourselves: Our first need is to discover what is really the proper form of the science of Economics. For a thing that fluctuates cannot be taken hold of directly. There is no real sense in trying to take hold by direct observation of something that is for ever fluctuating. The only sensible procedure is to consider it in connection with what really lies beneath it.

Let us take an example. For certain purposes in life we use a thermometer. We use it to read the degrees of temperature, which we have grown accustomed in a certain sense to compare with one another. For instance, we estimate 20° of warmth in relation to 5° and so on. We may also construct temperature curves. We plot the temperatures for instance during the winter, followed by the rising temperatures in summer. Our curve will then represent the fluctuating level of the thermometer. But we do not come to the underlying reality till we consider the various conditions which determine the lower temperature in the winter, the higher temperature in the summer months, the temperature in one district, the different temperature in another, and so forth. We only have something real in hand, so to speak, when we refer the varying levels of the mercury to that which underlies them. To record the readings of the thermometer is in itself a mere statistical procedure. And in Economics it is not much more than this when we merely study prices and values and so forth. It only begins to have a real meaning when we regard prices and values much as we regard the positions of the mercury — as indications, pointing to something else. Only then do we arrive at the realities of economic life. Now this consideration will lead us to the true and proper form of Economic Science.

By ancient usage, as you are probably aware, the sciences are classified as theoretical and practical. Ethics, for instance, is called a practical science, Natural Science a theoretical one. Natural Science deals with that which is; Ethics with that which ought to be. This distinction has been made since ancient time: the Sciences of that which is, the Sciences of that which should be. We mention this here only to help define the concept of Economic Science. For we may well ask ourselves this question: Is Economics a science of what is, as Lujo Brentano, for instance, would assert? Or is it a practical science — a science of what ought to be? That is the question.

Now, if we wish to arrive at any knowledge in Economics it is undoubtedly necessary to make observations. We have to make observations, just as we must observe the readings of the barometer and thermometer to ascertain the state of air and warmth. So far, Economics is a theoretical science. But at this point, nothing has yet been done. We only achieve something when we are really able to act under the influence of this theoretical knowledge.

Take a special case. Let us assume that by certain observations (which, like all observations, until they lead to action, will be of a theoretical nature) we ascertain that in a given place, in a given sphere, the price of a certain commodity falls considerably, so much so as to give rise to acute distress. In the first place, then, we observe — “theoretically,” as I have said — this actual fall in price. Here, so to speak, we are still only at the stage of reading the thermometer. But now the question will arise: What are we to do if the price of a commodity or product falls to an undesirable extent? We shall have to go into these matters more closely later on: for the moment I will but indicate what should be done and by whom, if the price of some commodity shows a considerable decrease. There may be many such measures, but one of them will be to do something to accelerate the circulation, the commerce or trade in the commodity in question. This will be one possible measure, though naturally it will not be enough by itself. For the moment, however, we shall not discuss whether it is a sufficient, or even the right measure to take. The point is: If prices fall in such a way, we must do something of a kind that can increase the turnover [Umsatz].

It is in fact similar to what happens when we observe the thermometer. If we feel cold in a room, we do not go to the thermometer and try by some mysterious device to lengthen out the column of mercury. We leave the thermometer alone and stoke the fire. We get at the thing from quite a different angle; and so it must be in Economics too. When it comes to action, we must start from quite a different angle. Then only does it become practical. We must answer, therefore: The science of Economics is both theoretical and practical. The point will be how to bring the practical and the theoretical together.

Here we have one aspect of the form of Economic Science. The other aspect is one to which I drew attention many years ago, though it was not understood. It was in an essay I wrote at the beginning of the century, which at that time was entitled: “Theosophy and the Social Question.”* It would only have had real significance if it had been taken up by men of affairs and if they had acted accordingly. But it was left altogether unnoticed; consequently I did not complete it or publish any more of it. We can only hope that these things will be more and more understood, and I trust these lectures will contribute to a deeper understanding. To understand the present point, we must now insert a brief historical reflection.

* now published as “Anthroposophy and the Social Question.”

Go back a little way in the history of mankind. As I pointed out in the first lecture, in former epochs — nay, even as late as the 15^th or 16^th century — economic questions such as we have today did not exist at all. In oriental antiquity economic life took its course instinctively, to a very large extent. Certain social conditions obtained among men — caste-forming and class-forming conditions — and the relations between man and man which arose out of these conditions had the power to shape instincts for the way in which the individual must play his particular part in economic life. These things were very largely founded on the impulses of the religious life, which in those ancient times were still of such a kind as to aim simultaneously at the ordering of economic affairs. Study oriental history: you will see there is nowhere a hard and fast dividing line between what is ordained for the religious life and what is ordained for the economic. The religious commandments very largely extend into the economic life. In those early times, the question of labour, or of the social circulation of labour-values did not arise. Labour was performed in a certain sense instinctively. Whether one man was to do more or less never became a pressing question, not at any rate a pressing public question, in pre-Roman times. Such exceptions as there may be are of no importance, compared to the general course of human evolution. Even in Plato we find a conception of the social life wherein the performance of labour is accepted as a complete matter of course. Only those aspects are considered which Plato beholds as Wisdom-filled ethical and social impulses, excluding the performance of labour, which is taken for granted.

But in the course of time this became more and more different. As the immediately religious and ethical impulses became less effective in creating economic instincts, as they became more restricted to the moral life, mere precepts as to how men should feel for one another or relate themselves to extra-human powers, there arose more and more the feeling in mankind which, pictorially stated, might be thus expressed: “Ex cathedra, or from the pulpit, nothing whatever can be said about the way a man should work!” Only now did Labour — the incorporation of Labour in the social life — become a question.

Now this incorporation of Labour in the social life is historically impossible without the rise of all that is comprised in the term “law” or “right.” We see emerge at the same historical moment the assignment of value to Labour in relation to the individual human being and what we now call law. Go back into very ancient times of human history and you cannot properly speak of law or rights as we conceive them today. You can only do so from the moment when the Law becomes distinct from the “Commandment.” In very ancient times there is only one kind of command or commandment, which includes at the same time all that concerns the life of Rights. Subsequently, the “Commandment ” is restricted more to the life of the soul, while Law makes itself felt with respect to the outer life. This again takes place within a certain historic epoch, during which time definite social relationships evolve. It would take us too far afield to describe all this in detail, but it is an interesting study — especially for the first centuries of the Middle Ages — to see how the relationships of Law and Rights on the one hand, and on the other those of Labour, became distinct from the religious organisations in which they had hitherto been more or less closely merged. I mean, of course, religious organisations in the wider sense of the term.

Now this change involves an important consequence. You see, so long as religious impulses dominate the entire social life of man-kind, human Egoism does no harm. This is a most important point, notably for an understanding of the social and economic life. Man may be never so selfish; if there is a religious organisation (and these, be it noted, were very strict in certain districts in oriental antiquity) such that in spite of his egoism the individual is fruitfully placed in the social whole, it will do no harm. But Egoism begins to play a part in the life of nations the moment human Rights and Labour emancipate themselves from other social impulses or social currents. Hence, during the historical period when Labour and the life of legally determined Rights are becoming emancipated, the spirit of humanity strives as it were unconsciously to come to grips with Egoism, which now begins to make itself felt and must in some way be allowed for in the social life. And in the last resort, this striving culminates in nothing else than modern Democracy — the sense for the equality of man — the feeling that each must have his influence in determining legal Rights and in determining the Labour which he contributes.

Moreover, simultaneously with this culmination of the emancipated life of Rights and human labour, another element arises which — though it undoubtedly existed in former epochs of human evolution — had quite a different significance in those times owing to the operation of religious impulses. In European civilisation, during the Middle Ages, it existed only to a very limited degree, but it reached its zenith at the very time when the life of Rights and Labour was emancipated most of all. I refer to the Division of Labour.

You see, in former epochs the division of labour had no peculiar significance. It too was embraced in the religious impulses. Everyone, so to speak, had his proper place assigned to him. But it was very different when the democratic tendency united with the tendency to division of labour — a process which only began in the last few centuries and reached its climax in the nineteenth century. Then the division of labour gained very great significance.

For the division of labour entails a certain economic consequence. We shall yet, of course, have to consider its causes and the course of its development. To begin with, however, if we think it abstractly to its conclusion, we must say that in the last resort it leads to this: No one uses for himself what he produces. Economically speaking, what will this signify? Let us consider an example.

Suppose there is a tailor, making clothes. Given the division of labour, he must, of course, be making them for other people. But he may say to himself: I will make clothes for others and I will also make my own clothes for myself. He will then devote a certain portion of his labour to making his own clothes, and the remainder — by far the greater portion — to making clothes for other people. Well, superficially considered, one may say: It is the most natural thing in the world, even under the system of division of labour, for a tailor to make his own clothes and then go on working as a tailor for his fellows. But, economically, how does the matter stand? Through the very fact that there is division of labour, and every man does not make all his own things for himself — through the very fact that there is division of labour and one man always works for another, the various products will have certain values and consequently prices. Now the division of labour extends, of course, into the actual circulation of the products. Assuming, therefore, that by virtue of the division of labour, extending as it does into the circulation of the products, the tailor's products have a certain value; will those he makes for himself have the same economic value? Or will they possibly be cheaper or more expensive? That is the most important question. If he makes his own clothes for himself one thing will certainly be eliminated. They will not enter into the general circulation of products. Thus what he makes for himself will not share in the cheapening, due to the division of labour. It will, therefore, be dearer. Though he pays nothing for it, it will be more expensive. For on those products of his labour which he uses for himself, it is impossible for him to expend as little labour — compared to their value — as he expends on those that pass into general circulation.

Well, I admit, this may require a little closer consideration, nevertheless it is so. What one produces for oneself does not enter into the general circulation which is founded on the division of labour. Consequently it is more expensive. Thinking the division of labour to its logical conclusion, we must say: A tailor, who is obliged to work for other people only, will tend to obtain for his products the prices which ought to be obtained. For himself, he will have to buy his clothes from another tailor, or rather, he will get them through the ordinary channels: he will buy them at the places where clothes are sold.

These things considered, you will realise that the division of labour tends towards this conclusion: No one any longer works for himself at all. All that he produces by his labour is passed on to other men, and what he himself requires must come to him in turn from the community. Of course, you may object: If the tailor buys his suit from another tailor, it will cost him just as much as if he made it for himself: the other tailor will not produce it any more cheaply nor more expensively. But if this objection were true, we should not have division of labour — or at least the division of labour would not be complete. For it would mean that the maximum concentration of work, due to the division of labour, could not be applied to this particular product of tailoring. In effect, once we have the division of labour, it must inevitably extend into the process of circulation. It is in fact impossible for the tailor to buy from another tailor; in reality he must buy from a tradesman and this will result in quite a different value. If he makes his own coat for himself, he will “buy” it from himself. If he actually buys it, he buys it from a tradesman. That is the difference. If division of labour in conjunction with the process of circulation has a cheapening effect, his coat will, for that reason, cost him less at the tradesman's. He cannot make it as cheaply for himself.

To begin with, let us regard this as a line of thought that will lead us to the true form of Economic Science. The facts themselves will, of course, all of them, have to be considered again later.

Meanwhile it is absolutely true — and indeed self-evident — that the more the division of labour advances, the more it will come about that one man always works for the rest — for the community in general — and never for himself. In other words, with the rise of the modern division of labour, the economic life as such depends on Egoism being extirpated, root and branch. I beg you to take this remark not in an ethical but in a purely economic sense. Economically speaking, egoism is impossible. I can no longer do anything for myself; the more the division of labour advances, the more must I do everything for others.

The summons to altruism has, in fact, come far more quickly through purely outward circumstances in the economic sphere than it has been answered on the ethical and religious side. This is illustrated by an easily accessible historical fact.

The word “Egoism,” you will find, is a pretty old one, though not perhaps in the severe meaning we attach to it today. But its opposite — the word “Altruism,” “to think for another ” — is scarcely a hundred years old. As a word, it was coined very late. We need not dwell overmuch on this external feature, though a closer historical study would confirm the indication. But we may truly say: Human thought on Ethics was far from having arrived at a full appreciation of altruism at a time when the division of labour had already brought about its appreciation in the economic life. Taking it, therefore, in its purely economic aspect, we see at once the further consequences of this demand for altruism. We must find our way into the true process of modern economic life, wherein no man has to provide for himself, but only for his fellow-men. We must realise how by this means each individual will, in fact, be provided for in the best possible way.

Ladies and gentlemen, this might easily be taken for a piece of idealism, but I beg you to observe once more: In this lecture I am speaking neither idealistically nor ethically, but from an economic point of view. What I have just said is intended in a purely economic sense. It is neither a God, nor a moral law, nor an instinct that calls for altruism in modern economic life — altruism in work, altruism in the production of goods. It is the modern division of labour — a purely economic category — that requires it.

This is approximately what I desired to set forth in the essay I published long ago.* In recent times our economic life has begun to require more of us than we are ethically, religiously, capable of achieving. This is the underlying fact of many a conflict. Study the sociology of the present day and you will find: The social conflicts are largely due to the fact that, as economic systems expanded into a World-Economy, it became more and more needful to be altruistic, to organise the various social institutions altruistically; while, in their way of thinking, men had not yet been able to get beyond Egoism and therefore kept on interfering with the course of things in a clumsy, selfish way.

* see “Anthroposophy and the Social Question.”

But we shall only arrive at the full significance of this if we observe not merely the plain and obvious fact, but the same fact in its more masked and hidden forms. Owing to this discrepancy in the mentality of present-day mankind — owing to the discrepancy between the demands of the economic life and the inadequate ethical and religious response — the following state of affairs is largely predominant in practice. To a large extent, in present-day economic life, men are providing for themselves. That is to say, our economic life is actually in contradiction to what — by virtue of the division of labour — is its own fundamental demand. The few who provide for themselves on the model of our tailor do not so much matter. A tailor who manufactures his own clothes is obviously one who mixes up with the division of labour something that does not properly belong to it. But this is open and unmasked. The same thing is present in a hidden form in modern economic life where — though he by no means makes his products for himself — a man has little or nothing to do with the value or price of the products of his labour. Quite apart from the whole economic process in which these products are contained, he simply has to contribute, as a value to the economic life, the labour of his hands. It amounts to this: To this day, every wage-earner in the ordinary sense is a man who provides for himself. He gives only so much as he wants to earn. In fact, he simply cannot be giving as much to the social organism as he might give, for he will only give so much as he wants to earn. In effect, to provide for oneself is to work for one's earnings, to work “for a living.” To work for others is to work out of a sense of social needs.

To the extent that the demand which the division of labour involves has been fulfilled in our time, altruism is actually present — namely: work for others. But to the extent that the demand is unfulfilled, the old egoism persists. It has its roots in this — that men are still obliged to provide for themselves. That is economic Egoism. In the case of the ordinary wage-earner we generally fail to notice the fact. For we do not ask ourselves: What is it that values are really being exchanged for in this case? The thing which the ordinary wage-earner manufactures has after all no-thing to do with the payment for his work — absolutely nothing to do with it. The payment — the value that is assigned to his work — proceeds from altogether different factors. He, therefore, works for his earnings, works “for a living.” He works to provide for himself. It is hidden, it is masked, but it is so.

Thus one of the first and most essential economic questions comes before us. How are we to eliminate from the economic process this principle of work for a living? Those who to this day are still mere wage-earners — earners of a living for themselves — how are they to be placed in the whole economic process, no longer as such earners but as men who work because of social needs? Must this really be done? Assuredly it must. For if this is not done, we shall never obtain true prices but always false ones. We must seek to obtain prices and values that depend not on the human beings but on the economic process itself — prices that arise in the process of fluctuation of values. The cardinal question is the question of Price.

We must observe prices as we observe the degrees of the thermometer, and then look for the underlying conditions.

Now to observe a thermometer we need some kind of zero point, from which we go upward and downward. And for prices a kind of zero-level does in fact arise in a perfectly natural way.

It arises in this way. Here we have Nature on the one side. (Diagram 2) It is transformed by human Labour. Thus we get the transformed products of Nature, and this is one point at which values are created. On the other side we have Labour itself. It, in its turn, is modified by the Spirit, and there arises the other kind of value. Value 1, Value 2. And, as I said on a previous occasion, price originates by the interaction of Value 1 and Value 2.

Now these Values on either hand — Value 1 and Value 2 — are in fact related to one another as pole to pole. And we may put it as follows: If a man is working in this sphere, for example (Diagram 2 right-hand side), or mainly so — in an absolute sense it is of course impossible, but I mean mainly in this sphere — if in the main his work is of the type that is organised by the Spirit, then it will be to his interest that the products of Nature should decrease in value. If on the other hand a man is working directly upon Nature, it will be to his interest that the other kind of products should decrease in value. Now when this “interest” becomes an effective process (and so, in fact, it is, for if it were not so, the farmers would have very different prices, and vice versa; the actual prices on both sides are, of course, very “occult”) we may be able to observe a kind of Mean Price midway between the two poles where we have two persons (there must always be two, for any economic dealings) with little interest either in Nature or Spirituality or Capital. When is it so in practice? We have the case in practice if we observe a pure trader, a pure middleman, buying from and selling to a pure middleman. Here, prices will tend towards a mean. If under normal conditions (we shall yet have to explain this word “normal ”) a middleman trading in boots and shoes buys from a middleman trading in clothes and vice versa, the prices that emerge will tend to assume the mean position. To find, the mean price-level, we must not go to the interests of those producers who are on the side of Nature, nor of those who are on the Spiritual side. We must go to where middleman trades with middleman, buying and selling. Here it is that the mean price will tend to arise. Whether there be one middleman more or less is immaterial.

This does not contradict what we have said before. After all, look at the typical modern capitalist. Are they not all of them traders? The industrialist is after all a trader. Incidentally he is a producer of his particular goods; but economically he is a trader. Commerce has developed very largely on the side of production. In all essentials, the industrial capitalist is a trader. This is important. In actual fact, modern conditions amount to this: All that arises here in the middle (Diagram 2) rays out to the one side and to the other. On the one side you will soon recognise it if you study the typical business undertaking; and we shall see how it appears on the other side in the course of the next few days.