For the Common Weal
John Carruthers, 1836-1914
Keith Rankin; January 1994
"It is of momentous importance to know which of our sciences is true, and by which, therefore, our social life must be governed ... No-one therefore, who has given any study to the subject, and has arrived at conclusions different from those currently accepted, need apologise for publishing the results of his work. If, indeed, he failed to do so,, he would be guilty of treason to the commonwealth, however little effect he might anticipate from the publication, and it is as a duty that this treatise has been written and is now offered to the public".
John Carruthers, 1882, preface to Commercial and Communal Economy.
New Zealanders are woefully ignorant about the intellectual history of their nation. (Is it possible that New Zealand could presume to have an intellectual history, short of one or two honoured expatriates such as Lord Rutherford and Katherine Mansfield?) I believe that part of our growing up as a nation is to acknowledge that history. New Zealand contributors to economic thinking are among the least acknowledged. Establishment interests here have always felt threatened by original thought on our own doorstep with respect to politically sensitive subjects, while politically incorrect expatriates have been generally ignored.
John Carruthers? Who? Described by Bert Roth as "The Man who Built our Railways", he lived just one-tenth of his life in New Zealand. Nevertheless, while his engineering achievements were truly global, it was his New Zealand years that he acknowledged as being central to his life. While at the peak of his professional career and living in Wellington, he developed a passion for economic philosophy. He saw New Zealand as a potential workers' paradise that was being destroyed by small-minded capitalists and the local adherents of the politically correct English "plutologists", the classical economists whose allegedly confused doctrines had tremendous global authority, and served to justify and perpetuate the iniquities of Victorian-era capitalism.
Not content to simply criticise the predominant authorities of his day (by far the most prominent being John Stuart Mill) for a lack of logical consistency, Carruthers formulated a communalist alternative to the prevailing commercial economy; an alternative that made full use of market forces as the basis of resource allocation while ensuring a communistic outcome. Manchester University's Professor Ian Steedman labels Carruthers as a "Victorian Market Socialist" who espoused public ownership of the means of production, while favouring a minimalist decentralised polity.
Carruthers' greatest hero was Adam Smith (a moral philosopher who was anything but the right-wing ideologue that he is commonly supposed to have been). Initially ignorant of Marx's writings - Marx had yet to become an object of fear and loathing in 1870s' Wellington - Carruthers developed a strong antipathy towards centralised Marxian socialism.
"Carruthers was like a Norseman ... roaming through unknown lands, camping and making bridges ... watching the stars and thinking".
May Morris, 1936, William Morris, Artist, Write, Socialist.
John Carruthers was born in Inverness, Scotland, in 1836. His father was a newspaper editor and proprietor with valued literary connections. John was set to study Arts at Cambridge, but was more interested in an early taste of Overseas Experience (OE). While still a teenager, he studied engineering in Canada. A high flier, in the 1860s he worked on major construction (mainly railway) projects in Canada, USA, Russia, Mauritius and India.
In 1871, Julius Vogel - the architect of New Zealand's first great "Think Big" scheme - travelled to Great Britain, where he hired Carruthers as New Zealand's first Engineer-in-Chief. Carruthers' main task was to build railways, and the most significant (from both economic and engineering points-of-view) was the route across the Rimutakas linking Wellington with its Wairarapa hinterland. With the exception of a few judges, Carruthers became New Zealand's highest paid public servant.
It was Carruthers who decided to adopt the novel "Fell" system to solve the unique problems posed by the Rimutaka range, and it is to his credit that the Rimutaka incline was completed within the scheduled time and budget, and that it operated under unique conditions virtually without incident for 75 years (when a tunnel was built under the range). His was the only really successful implementation of the Fell technology anywhere in the world.
Carruthers resigned his position in 1878, when his job was about to be disestablished. At that time there was much tension between Dunedin and Wellington interests within the Public Works hierarchy. Both Ministers of Works (Larnach and McAndrew) in the 1877-79 Grey Government had private interests in the Dunedin-based Peninsular and Ocean Beach Railway Company, which was looking to use reclaimed land in Dunedin as a crucial part of a venture that was to promote the development of Tairoa Head as Dunedin's main port, and which would have enriched peninsular landowners (such as Larnach). The Public Works Department had pre-emptive rights over the reclaimed land, and Carruthers, acting in the interests of his Department and the wider public interest, defended the interests of the public railway system over the private interests of Dunedin businessmen. Refusing to accept the job of Engineer-in-Chief for the North Island, Carruthers tended his resignation in April 1878, following McAndrew's appointment as Minister of Public Works.
Carruthers stayed in New Zealand another year, serving out his notice. After returning to London he maintained links with the Government as a consulting engineer. Subsequent engineering projects included using his Rimutaka experience to devise a solution to a particularly difficult railway problem in Venezuela in 1883 (upon which he staked his future career as a private consultant), railway construction in Argentina, waterworks in Western Australia, and work on preserving ancient monuments (such as Stonehenge) in Britain.
Carruthers presented four papers to the Wellington Philosophical Society in the period 1875-78. The latter two, in January and June 1878, became his first publications on economics. In challenging the work of J.S. Mill - a Godlike figure of authority in New Zealand - he ruffled a few establishment feathers. While I cannot say that Carruthers' radical views cost him his job, it is noticeable that he showed signs of becoming preoccupied with economics in the year in which his job disappeared. During his final year in New Zealand, he spent much of his time writing out his economic views. In 1882 he completed his 360-page book Commercial and Communal Economy.
1883 was a big year for Carruthers. His book was published, he commenced the greatest engineering project of his career, and he met William Morris, a popular Utopian writer whose Hammersmith Socialist Society was to become a left-wing think tank of international repute. Carruthers became a close friend of Morris and an active member of the Society. While he appears to have made a considerable financial contribution to the Society, he never wrote for its newspaper, the Commonweal. However, Carruthers presented and published two lectures to the Society (1885 and 1894), with the latter paper making a number of references to alleged inadequacies in the Liberal Government's economic programme.
While Carruthers remained a faithful companion to Morris until Morris' death in 1895, his versions of socialism were diverging from the more dominant strands of left-wing thought. Unlike many of the backward-looking utopians (including Morris), Carruthers was a technological optimist who saw the importance of machines as a potential source of benefit to workers. His final writings - faithful to his earliest themes - were published in 1915 after his death by his son (and engineering partner) Gilbert. He no longer frequented socialist circles, and his death was not acknowledged by the socialist community.
Before he met Morris, Carruthers always used the terms "communal" and "communist" to describe his preferred economic order. Only his later writings used the word "socialist".
His writings were doomed to be forgotten. The introduction to Economic Studies - sent by Gilbert Carruthers to the NZ Society of Engineers and plagiarised by Furkert in his history Early New Zealand Engineers - ended up in the uncatalogued section in the basement of the Auckland University Library, from where I have retrieved it from obscurity. All of his English publications are very scarce, but his two important New Zealand articles can be found in any library which holds the Transactions of the New Zealand Institute.
"The main ends of Socialistic organisation would be: Firstly, that labour should be efficient; whatever commodities are actually being produced should be obtained with the minimum of toil: secondly, that the commodities produced should be of the right kinds, or, since the consumer is the best judge of what he wants, they should be such as the consumer prefers: Thirdly the goods produced should be justly distributed ... Commercialism has actually discovered a system of organisation by which results more or less satisfactory are obtained by the attention of each man to his own business. All we have to do, therefore, is to modify this machinery so as to adapt it to its new use, and the modification required is not great; the forms indeed of Socialism would be scarcely distinguishable from those of commercialism, however different might be the spirit".
John Carruthers, 1884, "The Industrial Mechanism of a Socialist Society", To-Day.
Carruthers emphasised complex global interdependence as a key feature of the economic system. As such, with everyone effectively cooperating with everyone else (albeit via Adam Smith's "invisible hand" of enlightened self-interest), it was impossible to say that any particular worker or capitalist was more deserving of a larger share of final production (the economic cake) than anyone else.
He emphasised the role of two distinct classes of producers in the commercial or capitalist economy: wage-workers and capitalists. His solution to the problem of distribution was to divide the cake evenly by abolishing capitalists (effectively converting them to managers rather than owners of property), and to pay workers (ie everyone) equal shares of the final product instead of fixed wages. Market forces would be used to allocate resources within the production process. In effect, company profits would be taxed at 100%, and would be collectively distributed to all workers.
Managers would be expected to behave as profit maximisers, even though they knew that at the end of the day their profits would be fully taxed. This is not as unrealistic as it seems. Salaried managers in the private and public sectors are asked to do just that today; to maximise the incomes of their shareholders (which may include themselves) rather their individual incomes. Employees of State Owned Enterprises are asked to work towards a goal of maximum public profit; a profit which is effectively a tax paid to the Treasury. (Of course, in practice, senior SOE employees do pay themselves "productivity bonuses" which, to an economist, are much more like profits than wages.)
Carruthers' view of the prevailing commercial economy (capitalism) was that the capitalists were the class of people who owned the economic cake, and divided it between themselves. The economic cake was made up of three essential components: (i) direct wealth; ie luxury goods and services that capitalists themselves desired, (ii) wage goods; ie the basic consumer goods and services required to make workers work (ie the workers' fuel), and (iii) implements; ie capital goods such as machinery, buildings and the latest technology.
Capitalists comprised employers and owners of the means of production. An owner (eg a farmer) might lend all of his property to a sharemilker who had no property of his own. Carruthers regarded both as capitalists because they together owned the product of their venture. On the other hand, an employee of the sharemilker is a worker, who is paid a wage (ie an entitlement to a fixed quantity of wage goods that capitalists collectively decided to produce).
The critical decision for economic growth is the collective decision by capitalists as to how they should deploy the existing stock of wage goods; over how many workers should be employed making luxury goods, how many producing wage goods, and how many producing implements. In the short run, it is in capitalists' interest to pay workers to produce the luxury items that they themselves want. However, the future growth of the cake depended on the production of wage goods and implements.
Capitalists with a lot of capital (big business) would be in a better position to sustain low rates of profit in the short term, because a small return on a large amount of capital could still equate to a large income. By doing so, they are able to progressively command greater control over the means of production, squeezing their smaller rivals out of business. When the ownership of wage goods and implements is sufficiently concentrated, big businesses are in a position to collude (tacitly or formally) not to compete with each other - to form a general cartel. When this happens, they will produce more goods for their owners, and fewer (wage) goods for workers to consume.
From the workers' point of view, when capitalists employ workers to build machinery, then those implements can be used to replace workers in future. So, under capitalism, high productivity economic growth leaves workers fighting between themselves for a progressively smaller share of the total cake, as more resources are used to produce implements and luxuries for rich capitalists. If the productivity increases made possible by technological investment are sufficiently high, wages may still increase (ie trickle down), but profits will increase at a much faster rate.
Carruthers' solution was simply that the productivity gains made possible by implements should be paid to workers rather than capitalists. That meant creating a one class society. While Carruthers saw that class as being a class of workers, they are really worker/capitalists. The rentier class of capitalists who lived solely off interest and dividends would cease to exist. Everyone of working age would have to make some current contribution in order to receive a share of the common wealth (the economic cake). Workers would also become capitalists by definition, by virtue of their collective ownership of the product of their labour, and by virtue of their inclusion in the decision-making process about what, how and how much to produce. Carruthers' ideal worker is an enlightened entrepreneurial manager, educated in humanities, philosophy and science. Such a manager seeks to maximise his or her contribution to the common wealth from which his or her own wage is drawn.
Feminists take note: Carruthers, in his second New Zealand paper, asserted that the two class system originated with the subjection of women by workshy men.
"The requisites of production are the same under present social arrangements as they would be in a commune; they are labourers, implements, and the wish to produce ... a wish strong enough to overcome man's natural repugnance to work. In a rude stage of society this wish is so weak that man will only labour under the immediate spur of hunger; his repugnance to making other people work is not so strong, and he makes his wife and slaves work even where the return from their labour is somewhat distant; the rude beginnings of agriculture are always the result of woman's labour".
John Carruthers believed that if the capitalist class were enlightened - ie practised enlightened self-interest - then they would choose to abolish themselves. But he believed capitalists had a very narrow view of their own best interests (as exemplified by the consensual views on economic policy held within the New Zealand financial community in 1986 and 1987). (By contrast he was aware that workers valued education and he thought they were often enlightened in the ways they conducted their lives.) So he believed that his preferred communal economy - "market communism" if you will - could only come about through violent revolution. Unlike Marx, he never really believed that such a revolution would happen, so in that sense he regarded his own work more as an academic hobby than as a call to arms.
Some of Carruthers' insights have been proved largely correct. Technological growth has proceeded in such a way as to progressively diminish the wage share of world income. Nevertheless, for a period (the 1950s and 1960s), the competition between capitalists (and between nations) generated rapid world growth, rising wage shares, and rapid technological innovation. Successful capitalists are now less interested in national or international economic growth and more interested in utilising their capital to their own collective advantage, themselves consuming a larger share of "their" economic cake than the emerging army of underemployed service workers.
It is interesting to compare this scenario with that painted by Robert Reich in his 1991 book The Work of Nations. Carruthers was clearly wrong in predicting that capitalists would become less numerous over time. Reich describes a new breed of class-conscious capitalists - the "symbolic analysts" - who, in large numbers, are acting in an apparently collusive way to appropriate the common wealth at the expense of a former working class that is now resigned to providing services for the newly dominant "human capitalists".
I am sure that John Carruthers would be disillusioned with yet fascinated by the state of economics today and by recent developments in the international economy. He would have had plenty to say, and he would have said it. He had the energy, passion and courage to submit his reflections to the public domain without expecting any reward or recognition. He understood intellectual debate to be a component of the common wealth which all men and women could (indeed should) draw from.
Note on Sources:
A revised version of the paper I presented to a History of Economic Thought Conference in Wollongong in 1993 should be available through most university libraries later this year, and from the Auckland University Economics Department from March 1994.
John Carruthers' two books (1883 & 1915) are available to visitors to Auckland University. The Economics Department Library holds a facsimile of "Commercial and Communal Economy". His 1884 and 1894 papers are available at Wellington's Turnbull Library. Copies of the 1885 and 1894 will shortly be available at the Auckland University Library.
The paper by van Parjis and van der Veen makes no reference to Carruthers. But it is an interesting exposition of the theme of using market means to achieve communistic ends.
The book by Wicksteed and the recent work by Steedman are the only references to Carruthers that I have come across by professional economists.
With respect to Carruthers' life in New Zealand, the latest (1993) volume of the Dictionary of New Zealand Biography contains an entry. Curiously, he is omitted from Scholefields earlier dictionary. Other information can be found in the Appendices to the Journals of the House of Representatives (AJHR) in the 1870s, especially the Reports of the Public Works Department, and in the National Archives in Wellington (ref. Roslyn Noonan, below).
Cameron, W.N. (1992), Rimutaka Railway, NZ Railway and Locomotive Society Inc., Wellington.
Carruthers, John (1877), "On Mill's Fourth Fundamental Theorem respecting Capital", Transactions of the New Zealand Institute, pp. 24-34. (Paper read before the Wellington Philosophical Society, 12 January, 1878.)
Carruthers, John (1878), "On Some of the Terms used in Political Economy", Transactions of the New Zealand Institute, pp.3-31. (Paper read before the Wellington Philosophical Society, 13 July, 1878.)
Carruthers, John (1883), Communal and Commercial Economy: Some Elementary Theorems of the Political Economy of Communal and Commercial Societies; Together with An Examination of the Correlated Theorems of the Pseudo-Science of Wealth as Taught by Ricardo and Mill, Edward Stanford, London.
Carruthers, John (1884), "The Industrial Mechanism of a Socialist Society", To-Day, November 1884, pp.468-89.
Carruthers, John (1885?), "Political Economy of Socialism", pamphlet of a lecture to the Hammersmith Branch of the Socialist League, London.
Carruthers, John (1894), "Socialism and Radicalism", Hammersmith Socialist Society, London.
Carruthers, John (1915), Economic Studies, Chiswick Press, London.
Furkert, F.W. (1953), Early New Zealand Engineers, A. H. & A. W. Reed, Wellington.
Morris, M. (1966), William Morris; Artist, Writer, Socialist, volume the second "Morris as a Socialist", Russell & Russell, New York (1st publ. 1936)
Noonan, R. (1975), By design : a brief history of the Public Works Department Ministry of Works 1870-1970, Ministry of Works and Development, Wellington.
Rankin, K. (1993, unpublished), "Three Nineteenth Century Contributions to New Zealand Economic Thought", presented to the History of Economic Thought Society of Australia, Wollongong NSW, July 1993.
Roth, H.. (1959), "The Man who Built our Railways", Public Service Journal (April 1959, p.3)
Steedman, I. (unpublished, 1993), "John Carruthers; a Victorian Market Socialist",, Economics Dept., University of Manchester.
Van Parjis, P. & van der Veen (1986), "A Capitalist Road to Communism", Theory and Society 15.
Wicksteed, P.H. (1933), The Common Sense of Political Economy, vol.II, Routledge & Kegan Paul, London.
Young, J. (1877), "On Paper Currency, being a Reply to a Paper by John Carruthers, M.Inst. C.E.", Transactions of the New Zealand Institute, pp.536-538.
© 1994 New Zealand Political Review
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