New Liberalism THE POLITICAL ECONOMY OF J.A. HOBSON JohnAllett John A. Hobson was a prominent member of a small band of British radicals who argued around the turn of the century that the consistent application of liberal ideas required the reorganization of capitalist societies along socialist lines. Allett here suggests that their march toward socialism was marked by a caution not overly to damage the liberal heritage of their forefathers and yet to provide a philosophical foundation for the creation of the welfare state, justified on the basis of right and efficiency. The author emphasizes Hobson's doctrine of imperialism and the related theory of under-consumption for which he is best known, while arguing that the lesser known of Hobson's doctrines - which the author describes as the 'organic theory of surplus value' - is essential to a full appreciation of the coherence of Hobson's thought. Allett compares the analyses of Hobson, Adam Smith, J.S. Mill, the Webbs, T.H. Green, Bosanquet, Marx, Lenin, Keynes, and Hobson's comrade-in-arms L.T. Hobhouse and puts in perspective the dismissive critiques of those contemporary scholars who claim that Hobson's work is value-laden, simplistic, and contradictory. This study presents an integral analysis of the life, times, and thought of a profound and original thinker, whose legacy to social democratic thought has yet to be fully appreciated. JohnAllett is assistant professor in Political Studies at Trent University. This page intentionally left blank JOHN ALLETT New Liberalism The Political Economy of J.A. Hobson UNIVERSITY OF TORONTO PRESS Toronto Buffalo London © University of Toronto Press 1981 Toronto Buffalo London Printed in Canada ISBN 0-8020-5558-3 Canadian Cataloguing in Publication Data Allett, John, 1947- New liberalism Bibliography: p. Includes index. ISBN 0-8020-5558-3 1. Hobson, J.A. (John Atkinson), 1858-1940. I. Title. HB103.H62A44 330.15'5 C81-094652-1 To my Mother, Father, and Gail This page intentionally left blank Preface Comments passed by modern scholars on the works of John Atkinson Hob- son often attest, even if only en passant, to the significance of his contribu- tion to the philosophy of social democracy. J.K. Galbraith, for example, has written that Hobson was 'the most original of English ... social reformers,' a view shared by British historians like Robert Skidelsky and Peter Clarke, the latter finding Hobson to be a profound if somewhat incautious thinker. Simi- larly, Michael Freeden has recently declared that, despite the better estab- lished reputations of T.H. Green and L.T. Hobhouse, Hobson was 'by far the most original and penetrating of the new liberal theorists at the turn of the century' and deserves 'far greater credit as an outstanding social thinker.'1 Nevertheless, comments such as these have not resulted, to date, in the publication of any specialized study of the corpus of Hobson's work. Hobson was a prolific writer of books and articles, the best known of which, no doubt, are Imperialism: A Study, which received praise from Lenin, and, to a much lesser extent, The Physiology of Industry, which was com- mended by Keynes. This remarkable juxtaposition of influences, in itself, should have secured Hobson from neglect, but it would seem that praise from high, as it were, obscured the view to Hobson below. The theme of both these books is the economic theory of underconsump- tion. This theme is certainly a recurring one in Hobson's works, but in this study it is not taken as the central motif of his thought. Instead, it is argued that a lesser known doctrine, which I have labelled 'the theory of organic surplus value' is the key to Hobson's philosophy. Although other scholars have drawn attention to this aspect of Hobson's thought, most notably Alan 1 Galbraith, The Age of Uncertainty (1977), 147; Skidelsky, Oswald Mosley (1975), 55; Clarke, Liberals and Social Democrats (1978), passim; and Freeden, The New Liberalism (1978), 253 viii Preface Lee and Michael Freeden, this is the first work fully to explore the organic nature of Hobson's concept of surplus value, and to utilize it in integrating both his economic and political thought. What emerges is a surprisingly coherent philosophy - surprising in the light of Hobson's reputation for inconsistency - which seeks to show that socialism is a prerequisite for the consistent application of liberal principles. This is the doctrine of New Liber- alism in a nutshell. Chapter 1 attempts to locate Hobson in his time and place; the rest of the book is thematic rather than chronological. In the thematic sections a con- scious effort has been made to quote extensively from the wide range of Hobson's works, partly because much of his work is now long out of print and it is hoped that the resuscitation of these lost scripts will prove of interest to the reader, and partly because the relative lack of historical development in Hobson's thoughts allows a free range in choosing the most apposite pas- sages for quotation. It is, of course, the burden of this study to show that Hobson is not deserv- ing of the neglect he has received in the past. For the most part this task has been undertaken by indicating the seminal contributions he made to eco- nomic and political thought, but it also has been necessary, on occasion, to attempt to reduce some standard, dismissive criticisms of Hobson's thought to what might be termed justifiable proportions. Although Hobson was keen to stress that all production was the result of joint efforts, the one exception he seemed to make was his own works. Rarely did he acknowledge any intellectual indebtedness. Not wishing to share in this inconsistency, I am very pleased to acknowledge the help and encouragement I received from my friends and colleagues, Jim Moran, Sten Kjellberg, Sally Zerker, Virginia McDonald, John Saul, Helmut Grost, David J. Bell, and Donald Smiley. Special thanks are due to Professor J.T. McLeod for leading me to, and R.I.K. Davidson for leading me through, publication. I also would like to note my appreciation of the efforts of Beryl Logan who typed the original manuscript. Finally, I would like to thank Nor- man Higson, Head Archivist at Hull University, S.K. Ellison, House of Lords Record Office, and C.E. Barralet, the South Place Ethical Society, for helping make my research visits to England both pleasant and productive. This book has been published with the help of a grant from the Social Science Federation of Canada, using funds provided by the Social Sciences and Humanities Research Council of Canada, and from the Publications Fund of University of Toronto Press. J.A. Contents PREFACE Vli 1 The Life and Times of J.A. Hobson 3 2 Economics and Ethics: A Human Valuation 47 3 Society as a Maker of Values 70 4 The Theory of Underconsumption 96 5 Hobson's Theory of Imperialism 131 6 The Foundations of a Welfare State 178 7 Democracy and the General Will 208 8 Conclusion: Hobson's Place in the Liberal Tradition 255 Bibliography of Hobson's Writings 263 INDEX 271