40. Old Age Pension Insurance

The fundamental justification for old age pensions lies primarily in their moral value, from which their economic benefits naturally flow. A man who has confidence in himself and his future is more inclined to save and elevate his condition. In contrast, one who faces uncertainty, fearing dependency on charity or family, may be discouraged from making personal provisions for old age. The effort appears too daunting, the sacrifices too severe. However, if he is assured of a minimum subsistence in his later years, he is not only encouraged to work with peace of mind during his prime but is also motivated to supplement this provision through personal savings. It is undoubtedly challenging to accumulate the first portion of 100 Lire of a pension entirely from one’s own savings before 1914, but when a foundational pension is guaranteed, the prospect of augmenting it through individual effort with and additional 10 or 50 or 100 Lire becomes far more tangible. The principle that it is easier to build upon an existing foundation than to start from scratch is not universally true, as many have succeeded from from the bottom; yet, the argument that human will is often frail, prone to immediate temptations, and easily disheartened by initial obstacles is by no means without merit.

Nevertheless, an old age pension represents a poor substitute for a superior societal structure in which such provisions would be unnecessary because the elderly would naturally find security in the assets they have accumulated—a home or land, inherited or built over time, voluntary savings, and the affection of a well-established family.

The necessity for state intervention in providing for old age is a fatal consequence - this adjective is employed both in the meaning of both historical inevitability and moral inferiority - of the modern social order that has been creeping up on us: large enterprises employing thousands of white and blue collars, huge, tentacular metropolises where millions live a lonely life in anonymity, living out of their own wage or salary and economic structures that detach individuals from land and home with not other support in life but their savings book, on which are written figures, which say nothing to the heart and mind of those who renounced the consumption of the goods represented by those figures. In this context, old age pensions become an unfortunate yet inevitable response to the conditions created by contemporary society. They serve as a meagre replacement for the security once afforded by private property, familial cohesion, and lifelong economic self-sufficiency. One may well question whether the urban industrial lifestyle, which necessitates such pensions, is a wretched necessity, a pale substitute for what in other types of society are the possession of the house, the garden, the field, the possibility of watching over the games of one's children's children and the work of younger generations, the pride of still being able to do some work in the garden and in the house, which is not a melancholic prison of two rooms at the end of a dark, black courtyard, but is open to the sun and opens out onto a bit of its own land, whether alternative models of social organisation could restore forms of life more conducive to dignity in old age. Is the type of life imposed by the contemporary big city really fatal? Is not the reconstruction, in the ways imposed by big industry, of different kinds of life possible? These are weighty questions, but for present purposes, it suffices to affirm that old age pensions, while necessary, remain a lesser alternative to higher moral and economic safeguards for the elderly.

The true merit of the pension system, which would remain effective even in an improved social order, lies in the autonomy it grants to the elderly, and even more for those living hand to mouth, in their being financially self-reliant on an income destined to perish with them and not to be handed down to children and heirs. This argument may seem paradoxical in light of the previous discussion on the virtues of land and home, of a garden or any other visible and tangible asset as sources of security if we also add the benefits from the right to a life-long pension, destined to die with the recipient. However, human nature, shaped by history, custom, religion, and law, still harbours atavistic tendencies. In many cultures, past and present, the elderly—once they have outlived their economic usefulness—have been cast aside, their presence deemed a burden on the younger generation. And in them live sometimes, not too seldom, alas, the unconfessed and subconscious remnants of the sentiments that, millennia ago and still today among savage tribes, drive the old men, having become powerless to fight and hunt, to gather up their children, descendants and neighbours and lead them to the place where, at their command, the pit is dug, in which they lie to be taken from life and covered with earth. Better to die than to be a burden on the tribe that has to move to escape the enemy or fight them or go in search of sustenance. So it is of so many old people even today. Powerless to work, they retire humiliated before their sons and daughters-in-law who have taken over the rule of house and land. Despite owning property. they have a sense of their own worthlessness. and this indeed kills them in time. Hence. the provision of a life-long-only pension shall mitigate this disheartening sense of powerlessness. Men among men. they will feel. and with them will feel sons and daughters-in-law and grandchildren. that they are able to contribute something to the common good. something that would be lost if they died. Therefore. they live and know they can live without being entirely dependent on others. Respect and affection and the affirmation of one's own personality are the fruit of old age pension; so much so that it contributes - slowly but surely - to lessening the sense of contempt in which the young hold the old. who preceded them but are now incapable of following the toil which has enabled their children get the witness in the fullness of their strength[10].

A crucial factor in contemporary pension policy is the demographic shift towards an ageing population. The Beveridge Report notes that in Britain. those classified as elderly (56 years for men and 60 for women) constituted 6.2% of the population in 1901. By 1941, this figure had doubled to 12%. with projections estimating an increase to 14.5% in 1951 and 20.8% in 1971. The proportion of non-working dependents is thus rising. while the share of active contributors is diminishing. The heavier the trend of declining birth rates and increasing life expectancy. the more serious the financial challenge. as the burden of supporting pensions grows heavier on the working population. A blanket increase in the retirement age—raising it from 65 or 60 to 70 or 65. respectively—would be an inequitable solution. disproportionately affecting those who are physically incapable of continuing work before 70 against those who at 70 are vigorous and prosperous. Instead. incentives should be provided for voluntary postponement of retirement. as recommended by Beveridge. Under this approach. the concept of an old age pension is replaced by a retirement pension. which individuals can defer in exchange for increased benefits. Over 65 for men and 60 for women. pension would increase by two shillings a week for every year of delay for the husband and wife couple. and by one shilling for the individual pension.. A couple who would delay retirement until 70 would see their pension rise from 40 to 50 shillings per week. while an individual would receive an increase from 24 to 29 shillings. Due a postponed retirement from labour, the system would alleviate the financial strain on public funds; it would retain productive and experienced labour within the economy, and push in time the onset of physical decline associated with forced idleness in old age. The opportunity offered to the elderly to work actually distances the onset of physical decay and thus of true old age

41. Marriage, Maternity Insurance, and Family Allowances

The provision of financial support in the form of marriage and maternity insurance. as well as family allowances (granted according to the number of dependent children beyond the first and second or another stipulated threshold). is frequently justified under the umbrella of demographic policy. The postponement of marriage and declining birth rates have. since the early [twentieth] century. provoked concerns about demographic contraction. an issue that was first prominently observed in France. However. what was once regarded as a distinctly French predicament has now become a defining characteristic of all modern industrialised nations. Italy. too. is not immune to this trend. and were it not for the relatively high fertility rates still present in the southern regions. the country would have already entered a phase of demographic decline. as is observable in the north. The intended function of marriage and maternity benefits—comprising financial incentives and free maternal healthcare (which can be classified as a form of health insurance)—alongside family allowances. which supplement the primary earner’s income according to the number of dependent children. is to facilitate the establishment of new families and counteract the economic caution that dissuades individuals from having more than two or three children. In some nations. this figure rises to four. which is considered the minimum required to ensure population stability across generations. accounting for single and childless individuals as well as infertile couples.

Whether monetary interventions—such as marriage and maternity grants. family allowances. or tax exemptions for fathers of large families—are genuinely effective in reversing population decline is a question that cannot be answered solely through economic analysis. It is improbable that individuals would give birth to children for the sake of receiving a modest financial incentive. such as a pre-1914 premium of 100 lire or a family allowance of 50 cents (when those sums had some purchasing power). Such motivations are likely to apply only to the most destitute segments of society—groups already burdened by the inherited consequences of chronic poverty. poor health. alcoholism. and moral degeneration—whose procreation. from a social standpoint. might in fact be undesirable. given that their offspring are disproportionately at risk of swelling the ranks of major and minor criminals. vagrants. prostitutes and others living on the fringes of society. Fundamentally. demographic shifts are influenced far more by moral and cultural factors than by economic incentives. It is natural for parents to be concerned about their children’s future and to limit their offspring to a number they believe they can adequately raise and educate. ensuring their continuity within. or elevation above. their own social stratum. However. simply improving parents’ financial circumstances does not guarantee an increase in birth rates; indeed. it may even have the opposite effect. The phenomenon of the only child in small French landowning families—where a father seeks to preserve his estate for a sole heir. possibly complemented by the dowry of a similarly single-heir bride—is evidence of how economic means alone do not suffice to counteract declining fertility. The identification of suitable measures to address demographic decline remains fraught with complexity: the reconstitution of family life in single-family homes with orchards and gardens. located beyond the confines of overcrowded urban centres where multitudes live crammed into one or two rooms in cottages resembling beehives where the only way of escaping is the street or the tavern; ensuring that children receive adequate education and care in nurseries and schools. where they are provided. without excessive cost. with books. preventive healthcare. supervision during games. gymnastics and sports exercise; the establishment of scholarships to facilitate social mobility for the ambitious; and the reinvigoration of ties between urban and rural life. so that families are not wholly dependent on wages but can supplement their subsistence through small-scale land ownership. thereby enjoying access to fresh air. agricultural produce. and meaningful occupation for the household head thus making the bond between parents and children meaningful. More effective than direct monetary grants for marriage and maternity are the provision of maternity clinics to assist mothers before and after g birth to their children. assistance in acquiring essential household furnishings for newlyweds. and affordable. sanitary housing for young couples who do not yet own property. Moreover. all measures that reduce life’s uncertainties—without diminishing individuals’ incentives for self-improvement - lessens the nightmare of the unforeseeable event that brings unemployment. is an indirect but effective factor to contribute to the stability of society and an obstacle to that sort of slow collective suicide that is made evident by the fall in the birth rate.

Nevertheless. family allowances possess a justification beyond demographic policy. Wages are determined by market forces and collective bargaining agreements. and their calculation—whether on an hourly or piecework basis—does not account for the number of dependents a worker supports. Nor could wages be adjusted in this manner without creating a perverse incentive for employers to favour single employees over married ones. and childless workers over those with large families—an outcome that could exacerbate unemployment among the latter group. However. the rigidity of market-determined wages conflicts with a broader notion of equity. which holds that fathers of numerous children should be able to support their offspring’s upbringing and education from their earnings. Statistical evidence suggests a direct correlation between poverty and family size. A recent survey conducted in Bristol provides an illustrative example:

These results are hardly exceptional or random. They all concern households whose head manual worker earns, if unskilled, 42 shillings or if employed no more than £5 a week. The variations are regular. As the number of children increases:

• The proportion of families in the group decreases: from 57.4 per cent for childless households to 3.6 per cent for households with four children and more;
• Among all families surveyed, the incidence of extreme poverty grows in parallel with the number of children. Where on average 10.3% of the total belong to what the British call the submerged tenth, the tenth who cannot raise their heads above the poverty line, the proportion increases with the number of children, up to 51.3% for the group with four children and more.

Thus, the principle of wage equality—whereby workers receive identical remuneration for equivalent work, irrespective of family size—clashes with a universal sense of justice that demands that having children should not precipitate destitution or deter productive labour. In response. compensation funds were first established voluntarily by certain industrialists within their companies or professional associations and were later codified into law in countries such as Italy, where they became mandatory for broad categories of workers. Under this system, employers contribute a fixed amount per worker—regardless of marital or parental status—to a collective fund, preserving the principle of employer neutrality in hiring decisions. The fund then distributes allowances to household heads according to their number of children. The Beveridge Plan proposed a family allowance of eight shillings per child beyond the first, for whom no payment was deemed necessary, on the assumption that parents could reasonably provide for their firstborn from their existing income. When averaged across all children, this system resulted in a progressively structured allocation of benefits.

Nevertheless, the rationale for family allowances does not eliminate the relevance of the observation already implicitly made about the so-called justification of the demographic policy: is financial assistance, i.e. a monetary gift, alone sufficient to lift families out of the submerged tenth? Why of the families with equal numbers of children 0, 1, 2, 3, 4 and more, respectively 8.4, 6.5, 11.1, 24.8 and 51.3% are below and therefore 91.6, 93.5, 88.9, 75.2 and 48.7% are above the poverty line?

The number of children is not equal in each group; and, given the nature of the households considered, isn't the wage supposed to be equal? Are there not cases in which households with lower wages and fewer children have not fell into the misery of the submerged tenth? What are the moral, spiritual, family characteristics of households that have fallen below and those that have remained above the line? If the “wage” factor is not decisive, is the family allowance not in danger of often failing in its purpose, which is not the higher earnings of the working father, but the household social uplift? Who ensures that the household allowance is not misspent? Would it not be more effective to provide additional non-monetary benefits to support families such larger homes with a kitchen garden, access to nursery schools and playschools with meals, preventive medical care for children and teen-age, subsidized holidays for children, scholarships for secondary and high schools? These measures may prove far more instrumental in securing the long-term well-being and prosperity of families than direct financial assistance alone.

42. Health insurance.

Health insurance has been posing serious problems in Italy over time epitomized in the choice between the uniform state organisation and charitable healthcare under the free initiative of private individuals, associations, and foundations, even those encouraged and subsidised by the state. If health insurance were only to offer all the sick the services of a health inspector, even a well-paid one - whereas GPs and sickness fund doctors are today in Italy poorly paid and render services corresponding to the payment received - it might as well do nothing. Between health inspectors and patients there is a relationship not of trust, but of suspicion. Without an active cooperation from the doctors and the free choice of doctor by the sick person, health insurance is expensive and unprofitable; moreover, it brings hatred and anti-social sentiments. In a country like Italy, where hospitable care has such great traditions, why dry up the sources of private charity, why limit the increase in the number of hospitals, clinics, nursing homes, physical rehabilitation, and preventive care by private charity and public bodies far and wide in the country?

If all those unable to afford home treatment were assured of care and medication in public and semi-public hospitals, what purpose would an elaborate insurance bureaucracy serve, with its extensive administrative overheads? If the logistical issues associated with municipalities’ obligations to reimburse hospital expenses for residents were resolved—so that any individual requiring medical attention could be admitted to a hospital or care facility upon request, immediately and without charge—there would be little justification for an extensive system of payments, contributions, and bureaucratic oversight. The fight against illness, including accident-related treatment, does not inherently belong within the sphere of insurance. Instead, efforts should be directed towards dismantling bureaucratic obstacles, expanding access to care, and ensuring hospitals can accommodate patients efficiently, even in times of peak demand. Just as children are not turned away from schools due to a shortage of teachers or classrooms, no patient should be left at street or at home if in need of hospital space. Furthermore, no individual should be compelled to remain at home for fear of leaving children unattended; thus, kindergartens, after-school programmes, and boarding facilities should be made available for children whose parents are undergoing medical treatment. Admittedly, all these measures would incur costs, yet they would likely represent an investment of public funds yielding considerable social benefit.

Should public or voluntary hospital-based care prove insufficient, particularly during transitional phases, semi-subsidised hospital treatment would be a more pragmatic solution than a cumbersome insurance apparatus burdened by extensive bureaucracy made up of offices, paperwork, payments and the like. A more effective model would grant doctors the freedom to enrol voluntarily in a recognised roster, while allowing patients to select their physician of choice from among those registered. Medical consultations could then be funded through a combination of direct patient contributions and a centralised fund, financed through taxation. Whether such taxation should be general or earmarked for healthcare purposes remains a matter for careful consideration. Similarly, the question of whether these funds should be administered solely by public bodies or also by charitable institutions and mutual aid societies ought to be resolved in favour of greater freedom of organisation. The fundamental principle should be that any patient opting out of entirely free hospital care must bear a proportion of the cost of private consultations, with fees set according to established tariffs agreed upon by public authorities and professional medical associations. Whether this patient contribution should amount to one-half, one-third, or one-quarter of the total fee is a secondary concern; what is essential is that the patient bears a perceptible share of the cost. Only under these conditions can a relationship of trust be fostered between doctor and patient, an indispensable prerequisite for effective treatment. Oversight and the prevention of collusion between patients and physicians in fraudulent claims should be entrusted to the financing bodies, professional medical organisations, and, above all, an informed and conscientious public.

43. Unemployment Insurance

Unemployment insurance presents a distinct set of considerations. Beveridge, as previously noted, has proposed an allowance of 40 shillings per week for a married couple, 24 shillings for a man with an employed wife, and 20 shillings for a single adult aged between 18 and 20. For those aged 16 to 17, it is reduced to 15 shillings, while an unemployed married woman in work would receive 16 shillings. It is worth recalling that these figures were determined based on the principle of ensuring every recipient a standard of living deemed essential for a working-class family to maintain a respectable existence. It would be redundant to reiterate the self-evident concern that many individuals, if provided with the means for subsistence in a state of idleness, may feel little compulsion to seek employment. Beveridge, however, asserts that the guarantee of a basic livelihood will serve as an incentive for individuals to seek work in order to augment their income and improve their social standing. This assumption may hold if average wages were substantially higher than the proposed unemployment allowance of 40 shillings per week. However, it is fundamentally inconsistent to presume that they will be so. How, after all, is the figure of 40 shillings determined if not by the income necessary for the basic subsistence of a working-class family—an income which, in turn, constitutes the benchmark around which normal wages are structured? Should wages rise in the future, this would signify an elevation in the standard of living and, by extension, a corresponding increase in the baseline from which unemployment benefits are calculated. The inescapable conclusion is that such benefits must necessarily be set below the level considered normal for a working-class family. Furthermore, unemployment benefits are proposed to be granted indefinitely, subject only to the recipient's obligation to attend training courses for alternative employment, to accept work deemed suitable, and to relocate—at the expense of the state—should employment opportunities be available elsewhere. Crucially, there is no requirement to demonstrate the absence of independent means. To what extent will these stipulations mitigate the risk of individuals indefinitely failing to find employment that aligns with their purported aptitudes? Scepticism on this matter is entirely justified. More than sceptical, one must be alarmed at the other great danger of unemployment insurance: that of creating or reinforcing the monopoly of labour supply to which the workers' unions aspire. It is a fine and oft-repeated observation that we inhabit a world dominated by monopolies or near-monopolies; that, indeed, monopolistic practices on the part of employers naturally provoke equivalent countermeasures from labour organisations. However, while the economist may find intellectual amusement in the impartial study of monopolistic structures—including those of a bilateral nature—it remains the duty of the statesman to address their real-world consequences. Social reformers, therefore, cannot take refuge in economic detachment, but must instead recognise their own responsibility as policymakers to curb or even repress and limit, rather than facilitate, monopolistic tendencies in the labour market.

That unemployment benefits, sufficient to sustain the livelihood of an unemployed worker's family, reinforce the monopolistic position of workers' leagues appears to be a difficult proposition to refute. When a workers' league comprises 100,000 employed members, it is naturally incentivised, during wage negotiations, to agree upon a hypothetical weekly wage of 30 lire (based on 1914 values), given that employers, all else being equal, have a vested interest in employing the entirety of the available workforce. However, should this 30 lire wage level result in only 90,000 workers being employed due to cost-effectiveness for employers, the league, in the absence of state-funded unemployment subsidies, must support the remaining 10,000 unemployed members from its own financial reserves. Since these reserves are derived from member contributions, the 90,000 employed workers must effectively deduct from their wages to sustain their unemployed colleagues. If the unemployment subsidy is set at 20 lire per week, the total cost amounts to 200,000 lire. Each employed worker would consequently need to forgo approximately 2.20 lire from their weekly earnings, thereby reducing their net wage from 30 to 27.8 lire. The critical question then arises: does it remain beneficial for them to persist in demanding a 30-lire wage? The answer is affirmative if their remaining net wage of 27.8 lire surpasses the alternative wage of 27 lire, which would be the theoretical equilibrium wage ensuring to convince employers hire all 100,000 workers. Conversely, it would be a less advantageous stance if, in response to labour market dynamics, employers were prepared to offer 28 lire per week to fully absorb the workforce. Thus, potential unemployment serves as a natural restraint on the extent to which workers' leagues can push for wage increases beyond the level that would ensure full employment.

Unemployment insurance, by shifting this financial burden onto a fund sustained largely by taxpayers—beyond a certain minimum contribution—liberates workers' leagues from the major concern of financing the unemployment they may inadvertently generate. If they persist in demanding a weekly wage of 30 lire, thereby causing 10,000 workers to become unemployed, the burden of the 20-lire subsidy per unemployed worker (amounting to 200,000 lire in total) falls upon the state fund. Why then should this become a cause for concern? Indeed, why not attempt to elevate wages further to 35 lire, even if this were to increase unemployment to 20,000? The weekly financial obligation would then rise to 400,000 lire per week, but the cost would still be borne by the public fund. While a theoretical economic limit to this process is not easily discernible, a political limit remains, particularly if policymakers seek to avoid provoking widespread dramatic public opposition. However, within certain thresholds, this strategy mirrors the tactics employed by monopolists on the entrepreneurial side, who similarly calculate the optimal pricing strategy to maximise net returns.

Unemployment benefits represent one of the many rigidifying influences that have impeded the proper functioning of a free market economy, ultimately contributing to its structural decline. If the goal is to eliminate or at least mitigate unemployment, it is essential to restore greater flexibility to the price mechanism and then to the determination of wages. This necessitates not the absolution of workers' leagues from the consequences of their wage policies, but rather an increase in their accountability. Instead of transferring to the state the financial burden generated by organised labour’s successful imposition of wages above the equilibrium level—where labour supply and demand are balanced—it is imperative that this responsibility be more directly borne by the leagues themselves. State-administered unemployment insurance thus emerges as one of the most precarious and contentious aspects of the broader system of social insurance and welfare. A reversal of this approach, reinstating direct accountability for those involved, would likely prove beneficial. To this end, rigorous investigations into the underlying causes of unemployment should be conducted, with the aim of quantifying their respective impacts. A clear distinction must be drawn between unemployment resulting from the wage policies of labour organisations and that arising from external and systemic factors such as economic crises or warfare. Only the latter category should properly fall within the remit of state-supported insurance schemes.

44. The Non-Decisive Arguments Regarding State Guarantees of a Minimum Standard of Living

The various insurance and social security schemes examined thus far—whose fundamental principles remain largely consistent across European nations—share a common characteristic: they are designed to protect workers (as in the continental models of Germany, Italy, and France) or, more broadly, individuals (as in the British approach, typically) from the financial consequences of specific contingencies. These contingencies include events that either terminate, suspend, or diminish earning capacity (such as death, disability, old age, accidents, illness, or unemployment) or reduce the sufficiency of income in meeting increasing familial responsibilities (such as marriage, maternity, or the financial demands of raising children). In the absence of such an event, the right to a subsidy, benefit, or pension does not arise.

Confronted with the complexities to be faced by each insurance branch of ensuring a minimum level of assistance in each of these individual cases, some have questioned whether the issue should not instead be addressed holistically. Since the underlying objective is not to ensure factual equality but rather equality of opportunity, a logical conclusion follows: the state should guarantee to every individual, from birth to death, a pension sufficient to meet the essential necessities of life. The definition of a minimum standard of living could be framed in its most limited form as the annual sum required to maintain an individual—whether an invalid or an elderly person (i.e., someone incapable of work)—at a reasonable level of comfort. Alternatively, it could be conceived more broadly as the amount necessary to provide for the sustenance, clothing, and education of a child or young person until they reach working age. At its widest interpretation, it would encompass the full sum required to satisfy the ordinary needs of an individual within a civilised society. This latter conception aligns with the notion advanced by Justice Higgins, Chief Justice of the first compulsory arbitration court established in Australia towards the end of the nineteenth century to adjudicate labour disputes. However, if the underlying principle of this theory is to provide individuals with a foundational starting point rather than a fixed state of subsistence, then the narrower definition would appear the more appropriate. The broader formulation, by contrast, would seem to correspond more closely to a final state of economic sufficiency in which individuals might settle without seeking further advancement.

In evaluating the concept of a universal state pension—an entitlement bestowed upon every individual from birth until their final journey—it is crucial to avoid becoming entangled in secondary considerations. The following, therefore, do not constitute decisive arguments in its favour:

• First, the argument of administrative simplification. The implementation of such a scheme would indeed eliminate the need for numerous bureaucratic mechanisms—inspections, medical assessments, government offices, healthcare organisations, retraining programmes for the unemployed, and so forth. Under this system, every living individual would, for instance, receive a postal cheque at the end of each week or month, delivered to their residence by a registered letter, redeemable upon simple verification of identity and proof of life. Alternatively, as financial literacy improved, periodic payments could be credited directly to a bank or savings account. Undoubtedly, such a system would entail significant administrative streamlining and cost reductions. However, these efficiencies would not in themselves constitute a decisive justification for adopting universal pensions, particularly if the greater expense of such a scheme—relative to insurance against individual adverse events—were offset by the increased certainty of assistance reaching those who genuinely require it, excluding the more numerous cases where it would be redundant;
• Second, the notion that universal pensions provide a direct and expeditious route to economic security, in contrast to the protracted, uncertain, and convoluted process of identifying and addressing only those specific instances where financial security has already failed. If this were the sole defence of a universal pension, it would warrant rejection on grounds of general principle. In economic and social affairs, the direct path is, with very few exceptions, the deceptive one. The true path is invariably circuitous—one along which individuals stumble, retrace their steps, experiment, fail, attempt again, and, on occasion, succeed. Whenever one encounters an individual who claims to offer a swift and definitive solution to a social problem, who presents a panacea for society’s ills, who promises that beyond a temporary phase of necessary constraints lies a future of unbridled prosperity and abundance, or who constructs an enemy to be vanquished—be it capitalism, communism, fascism, reactionism, or any other ideological adversary—in order to herald the triumph of some purported earthly paradise, whether in the form of communism, socialism, corporatism, or the like, one must exercise caution. At best, such a person is misguided; at worst, a charlatan. Only the arduous path, strewn with challenges and setbacks, is the one that leads to true progress; only along this path can individuals learn to improve themselves and make himself worthy of the goal they wants to attain. If no other advantage than simplicity and rapidity were presented by the principle of the minimum secured by means of a universal, state pension should therefore be rejected.

Conversely, the substantial financial burden required to implement a universal state pension does not, in itself, constitute a decisive argument against the scheme. Precise calculations in this regard are inherently difficult to establish. However, taking England as a case study and assuming a weekly pension of 16 shillings at 1938 prices (equivalent to 20 shillings at post-war valuations, as previously mentioned)—a figure aligned with the Beveridge Plan—the cost of such a universal pension paid by the state amounting to approximately £42 per annum per individual [1938], when extended to a population of 45 million, would result in an annual expenditure of approximately £1.9 billion. This would represent no negligible fiscal burden, particularly when combined with other public expenditures, which would, in aggregate, absorb a substantial portion of the estimated £5.2 billion (calculated at 1938 prices) constituting Britain’s projected post-war national income.

Similarly, in the Italian context, the financial implications of a universal pension appear no less daunting. If one assumes an annual pension of 300 lire per capita in pre-1914 Italian currency, the total cost for a population of 45 million would amount to 13.5 billion lire per annum - pre-1914. When combined with an estimated 2.5 billion lire required for ordinary public expenditure in the same currency, the resulting fiscal demand would approach 16 billion lire. This sum would need to be extracted from an annual national income, which, prior to 1914, had been estimated at approximately 20 billion lire.

Under these circumstances, at least in the case of Italy, the scheme would appear wholly unfeasible. Unless one is predisposed to optimistic delusions, it is inconceivable that the Italian tax authorities could accurately assess and levy taxes on a national income of 20 billion lire, when it is evident that such an endeavour would necessitate the extraction of 16 billion lire in taxation alone.

Nevertheless, the contention that a universal state pension is an impossibility or an utopian absurdity does not appear to be a conclusive argument. Two principal considerations mitigate such a claim. The first pertains to the inherent uncertainty surrounding national income projections. While Italy’s national income was estimated at 20 billion lire in 1914, it is impossible to predict the economic landscape of the post-war period, once the ravages of war have been rectified—a task that could conceivably be accomplished within a few years, provided that Italians, through vigorous debate and diligent labour, commit themselves to the enterprise of national reconstruction. Should they successfully harness the monumental advancements in productive technology achieved over the past three decades, the figure of 20 billion lire, once deemed substantial, may well become a relic of the past, eclipsed by new economic realities.

The second consideration is that the fiscal projections of 20 billion lire in national income and 16 billion lire in public expenditure become largely irrelevant under the premise of a universal state pension. The redistribution of purchasing power inherent in such a system would fundamentally alter patterns of consumption. The increased purchasing capacity of the lower-income classes, coupled with a corresponding reduction in the wealthier strata, would engender a shift in the composition of demand for goods and services. Consequently, the nature of production would change, prices would adjust, and the overall structure of the economy would transform. Moreover, since individual incomes—and, by extension, aggregate national income—are merely the summation of the prices of goods and services produced and exchanged, net of production costs, it follows that total national income, likely augmented in real terms by technological progress, would diverge significantly from its current monetary valuation. Thus, it is futile to dwell upon financial and economic calculations whose empirical basis remains entirely speculative. Far more productive is the effort to delineate the theoretical foundations of the issue at hand.

45. Arguments For a Universal State Pension

The following points advocate for a universal state pension:

• A universal state pension would afford young individuals the opportunity to decide for their entry into the labour market at the most advantageous moment. At present, the offspring of the indigent, of the working class, and of lower-tier employees are often compelled to seek employment as soon as they surpass the age at which national legislation mandates compulsory primary education or prohibits entry into industrial labour. Whether this compulsion stems from genuine economic hardship as declared by the parents or serves as a mere pretext for these latter to prioritise their own personal gratification over their obligations towards their children, the consequence remains unchanged: the underprivileged youth, in such circumstances, embarks upon life devoid of both a well-rounded general education and essential vocational training. As a result, he is consigned to the ranks of the unskilled labour force, perpetually constrained by the limited remuneration accorded to such workers, and rendered particularly vulnerable to the perils of unemployment, ill health, and moral degradation;
• For many, particularly those who are not among the most resolute, enterprising, or intellectually gifted, the immediate necessity of securing daily employment extinguishes any opportunity to cultivate their innate creative, inventive, or organisational capacities. How many potential innovations, how many technical advancements, remain smothered at their inception by the monotony of daily toil? How often does the relentless routine of factory life transform a hopeful and ambitious young worker into a resigned and disillusioned old man, his potential left unrealised? Even those who might resist overestimating the magnitude of such lost ingenuity must acknowledge the existence of this phenomenon.
• The immediate necessity of offering one’s labour force not only precludes individuals from enhancing their skills and thereby increasing their market value but also stifles competition at its core. Many who, if assured of their own subsistence and that of their families, would opt for an independent livelihood—whether through the pursuit of a free profession, a skilled trade, the management of a small shop, or the cultivation of land, a vegetable garden, an orchard, a vineyard first sharecropped, then rented and then purchased—are instead compelled by economic necessity to seek employment as clerks, wage labourers, or industrial workers under the direction of others. True competition entails choice—the ability not only to enter the market but also to withdraw from it. Even those who, based on their own observations, are convinced that the majority of urban dwellers favour the stability of a fixed salary over the uncertainties of independent enterprise must acknowledge that such a disposition is far less prevalent among those in rural communities. Farmers, long accustomed to the inherent unpredictability of the harvest, do not regard risk as an anomaly but as an intrinsic aspect of life. Likewise, among city dwellers, there exists a vigorous and enterprising minority, instinctively resistant to subordination, who would readily embrace the freedom of self-employment if afforded the opportunity. A universal state pension, by providing individuals with the option to step away from wage dependence, would alter the dynamics of the labour market. It would likely lead to an increase in overall remuneration, not merely through shifts in bargaining power but, more significantly, by fostering greater productivity among those who choose to remain within the workforce.
• To counterbalance the allure of independent enterprises—whether industrial or agricultural—employers would need to make wage labour more attractive not only through higher remuneration but also by improving the overall conditions of working and living, inside but also outside factories. Beyond financial incentives, they should offer forms of recognition that, in many cases, hold even greater value for workers: the satisfaction of well-executed work, public acknowledgment, opportunities for career advancement, and meaningful participation in the management and refinement of their respective departments, workshops, or sectors. A workplace where diligence and competence are rewarded with more than just wages—where loyalty and expertise earn genuine respect and influence—would elevate the worker’s role beyond mere employment. Experienced and dedicated blue and white collars would attain a moral standing within the enterprise, one that, in certain respects, might rival even financial compensation in significance.

46. Arguments Against a Universal State Pension

Two substantial arguments, however, contradict the above points:

• Even if one assumes that guaranteeing a lifelong pension sufficient for basic existence is economically feasible—though this remains uncertain—it is impossible to ignore the grave social risks such a system would entail. Even if the principle were established and the pension amount were initially limited to, say, 300 pre-1914 Italian lire per year (a figure that itself represents an unpredictable leap in the dark), one must confront a far more pressing danger: the encouragement of idleness.

One might posit the question: is the human disposition so fundamentally resistant to the allure of a life unburdened by labour, even within the parameters of societal norms, as to preclude a significant cohort from choosing indolence? Furthermore, can the augmented productivity of the remaining 80% adequately offset the diminished output attributable to the 20% who might opt for idleness? Should this proportion of inactive individuals expand, would the resultant socio-economic challenges become intractable? Crucially, what is the cumulative effect of a privileged minority's idle existence upon the work ethic and industriousness of the majority? These are inquiries that necessitate rigorous consideration, informed by empirical observation, professional experience, and contextual awareness. It is imperative to recognise the inherent complexity of social phenomena and to eschew simplistic solutions. Within a free society, the governing class must cultivate a commitment to reasoned discourse, grounded in scholarly inquiry and empirical data, whilst maintaining a vigilant aversion to populist rhetoric and demagogic pronouncements.

• Principiis obsta—resist the beginnings. Even if a universal state pension is introduced with the strict intention of covering only the bare essentials, can we be certain that it will remain at that level? If 300 pre-1914 Italian lire is hypothetically considered the minimum necessary for subsistence, who can prevent the inevitable political competition from pushing that threshold ever higher? Will it be possible to stop at merely providing panem without soon having to add circenses as well? Already in England and the United States, where the Beveridge Plan has been widely debated and celebrated, critics have pointed out that the proposed 40 shillings per week for couples and 24 shillings for single individuals barely suffice to cover the reasonable necessities of life—housing, food, clothing, medical care—according to the prevailing working-class standard. But man does not live by bread alone. People also seek leisure and rest, vacations in the mountains or by the sea, entertainment such as cinema or theatre. A survey published in the Swiss weekly Die Nation (Bern, May 11, 1944) illustrates this tendency: when asked at what age the Confederation should begin paying pensions, 58.9% of respondents favored 60 years, while only 41.1% opted for 65. As for the amount, no one was content with the lowest proposed sum of 600 Swiss francs per year. Only 5.5% of the interviewed accepted 900 francs, while 16.5% demanded 1,200 francs, 13.7% asked for 1,500, 21.2% pushed for 1,800, 25.5% wanted 2,400, and 17.6% even called for 3,000 francs annually.

The Inevitable Expansion and Corruption of Universal State Pensions

The granting of a gratuitous gift does not usually inspire gratitude or effort to deserve it; rather, it fuels resentment over its inadequacy. Just as even the most well-mannered individuals are often seen behaving disgracefully at lavish receptions where abundant refreshments are freely offered, so too does the introduction of a state pension—no matter how modest—inevitably provoke a relentless demand for increases. Politicians, eager for votes, will quickly transform the original intent of the pension from a minimal safety net into an ever-expanding entitlement, with each election bringing new promises to raise its amount. The fundamental premise of the system—that the pension should be merely a starting point—will be forgotten almost immediately. Instead, it will become a permanent condition for many, turning into a point of arrival rather than a temporary measure. This shift will foster an overwhelming culture of dependence. Even when limited only to the elderly, the responses to Die Nation's survey illustrate how quickly expectations escalate. The most commonly requested pension was 2,400 Swiss francs per year—an amount significant enough to give pause to even the most audacious financiers and the most optimistic sociologists. If such demands arise when discussing pensions for the elderly alone, how much greater would they become under a system of universal pensions for all? Rome did not fall under the swords of barbarian invaders; it had already crumbled from within, consumed by internal decay expressed by the infamous demand for panem et circenses.

Chapter III. Workers' Associations (Trade Unions, Leagues)

47. Introduction

In addition to social security and universal pension schemes, both of which originate from state intervention on behalf of the majority, it is essential to examine the initiatives and struggles undertaken by workers themselves in pursuit of their own advancement. Prominent among these are the organisations commonly known as trade unions in England, syndicats ouvriers in France, and leghe operaie in Italy.[11]

48. The Medieval Guild

Given that contemporary discourse has frequently drawn parallels—even in terminology—with the medieval guilds of arts and crafts, it is important to recognise that these institutions underwent two distinct phases. The first extended from the 13th century to the late 15th century (1200–1500 AD), while the second was characteristic of the era of modern centralised states (17th and 18th centuries).

The origins of these medieval guilds remain a matter of historical debate. Some trace their lineage to Roman collegia and professional associations, while others suggest they evolved from religious fraternities, which initially served to men exercising the same job as communal networks for prayer, funeral rites, patronal festivities, and mutual assistance in times of illness. Regardless of their precise genesis, these guilds emerged in medieval Italian cities during the 13th and 14th centuries as voluntary associations formed by craftsmen themselves. Crucially, such corporatio they were not the creation of external authorities—whether municipal governments, feudal lords, or ecclesiastical powers—but rather arose from the craftsmen’s own initiative. These associations were established to protect and advance their collective interests, to regulate professional conduct, to maintain fair dealings with customers, to set prices, and to uphold the integrity and quality of their trade. On occasion, collaborations between masters and workers assumed such significance that they became integral to the governance of their respective city-states. In some instances, the leaders of these guilds—the consuls—were even entrusted with the administration of the commune, either wholly or in part. It was also the case that the regulations established by these guilds often received a form of official recognition or approval from the municipal authorities. However, this did not preclude the possibility of amending such regulations, provided that any revisions were once again submitted for approval—whether to the commune or, in some instances, to a higher governing body. Crucially, this process did not alter the fundamental nature of the medieval guild: it remained a spontaneous, voluntary, and adaptable creation of its own members. These guilds were not primarily designed to preserve privileges. Entry into a trade was accessible to those who demonstrated the requisite skills, and the rigid structures that would later emerge—whereby advancement required a set period of apprenticeship before becoming a journeyman or a worker; and masters, only those who had completed the masterpiece. It was not uncommon for talented and financially independent young individuals to establish their own workshops and assume the rank of master or partner. Similarly, others entered directly into employment as journeymen, bypassing the traditional training process altogether. The political and social struggles that defined medieval city-states also shaped the structure and evolution of these artisan guilds. It is important to note that these organisations were composed primarily of artisans, rather than what we would today consider workers in a modern industrial sense. The distinction between employer and employee was far less pronounced than it is today, as movement between these roles was fluid. It was not uncommon for a worker to ascend to the status of master, with many sharing the same household as part of an extended professional family.

49. The Decline of the Guild System in the 17th and 18th Centuries

The landscape shifts dramatically as the dynamic environment of the free medieval city-states slowly transitioned, to the rigid and heavily regulated structures of the powerful monarchies of the 17th and 18th centuries. Alongside the great kingdoms of France, England, Spain, and the Holy Roman Empire, smaller political entities also adopted similar patterns of control. Governments, driven by the desire for order and domination, sought to regulate the once-autonomous trade guilds. Many of these guilds willingly accepted royal oversight, as it granted them privileges and exclusivity in their trades. In return, governments sanctioned these privileges, as they benefited from a steady flow of tax revenues—an appealing prospect at a time when securing reliable sources of revenue was a challenge for the public treasury. By the mid-18th century, the guild system had evolved into a system featured as follow:

a) Workers in various trades were classified into distinct guilds, each assigned a specific trade. Shoemakers crafted new shoes where enrolled in the guild of shoemakers, while craftsmen who repaired them were in the cobbler guild. Those working on house roofs and ceilings or constructing wagon wheels were classified as carpenters, but those who built carriages for travelers fell into a separate category of specialized carpenters. Meanwhile, those producing everyday furniture were recognized as woodworkers, whereas those crafting fine or veneered furniture were categorized as cabinetmakers. Additionally, a cobbler could not venture into shoemaking, nor could a shoemaker take up cobbling. Similarly, a carpenter specializing in roof structures or wagon wheels was prohibited from working on carriage bodies, and a cabinetmaker could not infringe upon the carpenter’s domain; and vice-versa. Inevitably, frequent disputes arose between different guilds—shoemakers versus cobblers, carpenters versus carriage builders, carpenters versus cabinetmakers—all struggling to define and defend their exclusive rights and borders boundaries of their fields of work.

A significant portion of the guilds’ income was not only spent on celebrations in honour of their patron saints but also consumed by endless legal battles over perceived "usurpations" by competing guilds. This constant need for arbitration further entrenched guild dependence on the courts, or Consulates, established by ruling authorities to mediate economic conflicts—ultimately deepening their subjugation to political power.

b) Within the guilds, a strict hierarchy governed the members. These organizations secured the exclusive right to provide goods and services to the public, arguing that only through such control could customers be guaranteed high-quality craftsmanship and authentic products. To uphold this standard, it became essential to ensure that only qualified individuals practiced the trade. This led to a structured system of training and examinations, reminiscent of the Chinese mandarinate. Queen Elizabeth’s Apprenticeship Statute of 1562 formalized this process, decreeing that in "market towns"—the industrial centres of the time—no one could become a journeyman (apprentice) without first completing seven years of training. During this period, the apprentice was either unpaid or poorly compensated and was required to serve under a single master for the entire duration. Only after this lengthy apprenticeship could a worker attain journeyman status, granting him the freedom to move between masters. However, even as a journeyman, he was still barred from establishing his own workshop or business until he had completed additional years of experience as determined by guild statutes. To achieve the rank of master, he had to create a so-called "masterpiece"—a pair of shoes, a piece of furniture, a farm wagon, or a luxury carriage—to demonstrate his skill. The final judges of their work were the established masters within the same craft.

c) Guilds act as public institutions. Since guild statutes dictated that only certified apprentices, journeymen, and masters could offer goods and high-quality services, it became essential for society to ensure that those practising the craft had the means to earn an honest living, in accordance with their respective rank.

On the one hand, the guild is responsible for guaranteeing the public the quality of workmanship. It achieves this through meticulous regulations, specifying the approved raw materials that must be used and the precise working methods and procedures required to ensure excellence. On the other hand, the guild dictates the prices or fees for its work, determining what it deems appropriate with the approval of the court, consulate, or relevant royal authority. Penalties are imposed on those who charge excessive or unduly low prices or produce goods that fail to adhere to corporative rules, whether due to inferior materials or improper methods. Such penalties may extend to the confiscation of goods and even the public shaming of the offender in the marketplace.

d) The hierarchy becomes an aristocracy of equals. Neither the regulated prices nor the approved methods could be maintained if any master rose too far above his peers—if, for instance, he hired a large number of apprentices and significantly increased production, thereby forcing prices down or compromising the quality of goods to sell his wares. To prevent this, guilds sought to protect apprentices and their wages by limiting the number of new entrants into the trade. Similarly, to safeguard the interests of established masters, they restricted the number of apprentices deemed worthy of having their masterpieces or journeyman’s work approved. Unlike today’s academic examination boards, where university, secondary, or primary school examiners have no vested interest in the number of students they pass, the privileged guilds of the 17th and 18th centuries operated differently. The masters responsible for evaluating masterpieces had a clear incentive to not approve submissions, thereby limiting competition within their trade. Sons or sons-in-law of existing masters were typically admitted with ease, while outsiders faced deliberate obstacles—whether through prolonged delays, outright refusals to accept their masterpieces, or exorbitantly high admission fees.

e) The aristocracy of equals becomes a closed, almost hereditary body, leaving a crowd of outcasts waiting in vain for the chance to earn a living independently. Over time, guilds transformed into rigid, exclusive institutions, where entry was increasingly restricted to those with hereditary ties. Aspiring workers, unable to gain approval, found themselves shut out from the trades, forced either into perpetual dependence on established masters or into a precarious existence on the margins of society. A French fable, Chinki: histoire cochinchinoise, gained significant popularity in 1768. Following the literary convention of the time, the author—Abbé Coyer—set the story in a distant Asian land. The tale recounts the plight of a peasant brother and sister who left the countryside in search of work in the city. Rejected time and again by guild masters, they were ultimately driven to crime and the underworld. The pamphlet was condemned by the parliaments (judicial courts) and publicly burned by the executor of high justice in town squares across France. Yet, despite official censorship, it was widely read and played a crucial role in the eventual abolition of the guilds.

f) Hierarchical structures and aristocracies, whether of labourers or masters, often subscribe to one of the most pervasive fallacies: the belief in a fixed quantity of work to be accomplished or goods to be sold. Demand for services or products is conceptualised as a finite resource or 'cake' to be apportioned among the various stakeholders. As the number of parties vying for a share increases, the immutable nature of the 'cake' dictates that the proportion of work to be undertaken or the profit or remuneration to be earned by each participant, whether master of worker, diminishes. This engenders a resistance to any innovation, be it technical or commercial, as there is a prevailing fear that such advancements will lead to increased production, shifts in quality, and expanded supply, all of which, it is believed, would inevitably be accompanied by a decline in prices and a subsequent reduction in earnings or wages. Thus, the guilds transform into conservative institutions, safeguarding obsolete methods and antiquated goods and services. Spontaneous initiatives, industrial innovations, and novel approaches are obstructed, compelling them to seek alternative avenues for expression.

50. The Abolition of Corporations and the Affirmation of Labour Freedom

The resolution to this issue was sought through two distinctly different approaches. One method, characterised by a French-style revolutionary approach. After an initial attempt at abolition by Minister Turgot in 1776, which was swiftly thwarted by the feeble Louis XVI, the Chapelier Law of 1791 permanently dismantled the corporations during the Revolution. In its reaction against the abuses of corporatist decay, this law further declared any form of workers' or employers' association aimed at altering leaving the worksite (strike) or closing factories (lockout) as a modification of working conditions, of raising prices, as illegal .

The other approach was more characteristically English, relying on peaceful circumvention. Following the enactment of Queen Elizabeth’s Statute of Apprentices, which imposed corporate restrictions on the “market towns”, the more enterprising individuals—workers who would otherwise be relegated, like pariahs, to the thresholds of industrial workshops—established their own workshops, laboratories, and enterprises outside the jurisdiction of these towns. Cities such as Manchester, Birmingham, and Leeds emerged from rural areas or small hamlets, growing into prosperous metropolises at the expense of older, privileged cities like York. These latter towns, clinging to their traditional privileges and adhering to the theory of a fixed quantity of labour and demand, gradually withered. Meanwhile, the new industrial cities flourished, thriving in a climate of freedom, and demonstrating through their actions that falling prices, new goods, or those produced by methods differing from the old statutory norms, could generate new demand and employment opportunities. By the close of the 18th century, this transformation had become complete, and by 1799, a law in England had declared any coalition of workers or employers, formed with the aim of demanding or resisting wage increases or reductions in working hours, to be illegal.

51. The Reassertion of Freedom of Association in the 19th Century

The reaction against corporatist restrictions had veered towards the opposite extreme, culminating in the early 19th century with the outright prohibition of both workers' and employers' associations formed to pursue shared economic interests. Strikes and lock-outs were consequently deemed punishable offences. However, opposition soon arose against this excessive rigidity, which, in the name of safeguarding liberty, paradoxically curtailed one of the most fundamental freedoms: the right of individuals to associate.

England was the first in 1824 to recognise the legitimacy of workers' associations with a legislative measure championed by Francis Place—himself a former worker turned industrialist. This was followed by further legislative developments, particularly after a landmark court ruling in 1867, which had declared collective labour agreements legally invalid on the grounds that they contravened the principle of individual freedom in contractual bargaining. Subsequent legal provisions enacted in 1871, 1906, and 1927 laid the foundation of the legal framework that would sustain the English trade unions. These provisions not only affirmed the legitimacy of such leagues but also granted them legal personality, enabling them to hold assets and to initiate or defend legal proceedings concerning their management. However, they were shielded from financial liability for economic losses incurred by employers or third parties as a result of industrial action. Consequently, acts of striking or work stoppages, when executed through collective decisions of the leagues or upon the directives of their leadership, could not entail legal or financial repercussions beyond those that would arise if undertaken by individuals acting independently. Furthermore, no action undertaken by an individual within the context of an industrial dispute could be deemed unlawful merely because it sought to persuade others to cease work, to breach an employment contract, or to impede the ordinary utilisation of capital and labour. In essence, the trade unions were empowered to advise, facilitate, and organise work stoppages or strikes without incurring financial liability for the economic consequences arising from work discontinuation. Legal recourse could, however, be pursued against individual actors only in instances where acts of physical or moral coercion had been employed.

In France, an imperial decree issued on 24 May 1864 repealed the criminal sanctions previously imposed on agreements to suspend labour. This legislative shift was further consolidated by the Waldeck-Rousseau Law of 1884, which revoked the restrictive Chapelier Law of 1791 and established a more liberal framework for the regulation of both workers' and employers' associations.

In Italy, the adoption of the new Penal Code in 1889 marked a significant departure from earlier prohibitions on collective action. This development was influenced, in part, by a landmark trial in Mantua, in which the young lawyer—later a distinguished professor and socialist statesman—Enrico Ferri, first rose to prominence by securing the acquittal of agricultural labourers accused of joining together to violate the law against coalitions formed to demand wage increases or changes in working conditions. The revised Penal Code no longer classified strikes, lock-outs, or collective bargaining coalitions as criminal offences. Instead, it established a more legally sound position, whereby only those who, during the course of a strike or lock-out, employed physical or moral coercion to obstruct others from exercising their free choice to work or abstain from labour were subject to legal penalties. This last is the only correct legal position.

52. The Characteristics of Workers’ Leagues on the Eve of the Great War

Under the framework of the aforementioned liberal legislation, the movement for workers’ and employers’ associations expanded throughout the industrialised world over the course of the 19th century. This proliferation was particularly evident across the Western civilisational sphere, encompassing Europe (excluding Russia), the United States, Canada, Australia, New Zealand, and the Latin American nations of Central and South America. Given the vast complexity of its evolution, a comprehensive account of its development is impracticable; however, its principal characteristics, as they became increasingly delineated on the eve of the First World War, may be briefly summarised as follows: a) Workers’ leagues—denominated variously as trade unions in England, syndicats in France, and sindacati or leghe in Italy—could, in certain contexts, exhibit a confessional or political orientation. This tendency, however, was relatively inconsequential in England, where religious sentiment was broadly diffused across society, yet denominational affiliations did not translate into distinct political organisations. Consequently, English trade unions emerged independently of both religious and political disputes. They have historically maintained, and continue to maintain, an institutional autonomy from political parties. While the Labour Party partially originated from within the trade union movement, and the majority of trade unionists align with it, no intrinsic or obligatory linkage exists between the two. Moreover, the Labour Party does not pursue a programme of radical social transformation (palingenesis), but rather seeks to secure specific legislative measures conducive to the welfare of the working classes.

In continental Europe, by contrast, workers’ leagues have historically maintained a close affiliation with political parties from their very inception. In nearly all cases, the majority of organised labour within these leagues aligned with the socialist party. This was followed by the emergence of Catholic leagues, and subsequently by various independent or liberal associations. Additionally, in France and Italy, workers’ leagues gained prominence, advocating a revolutionary form of socialism that sought not merely improved working conditions but the direct appropriation and autonomous management of industrial enterprises by the workers themselves.

Between these divergent models, the British approach—eschewing both religious and political affiliations—proved to be the more enduring and effective. It demonstrated a greater capacity to secure tangible, incremental improvements in the condition of the working classes. Indeed, it remains the predominant and most resilient framework to this day.

b) Workers’ leagues belong fundamentally to the category of voluntary associations. They do not owe their existence to statutory enactment, nor are they subjected to state regulation beyond the formal legal requirements governing their outward structure, as exemplified in France.

c) Arising from the voluntary association of individuals, workers’ leagues exhibit considerable structural and functional diversity, particularly in Anglo-Saxon nations. Within these countries, multiple forms of workers’ organisations coexist, including:

• Trade Associations, which unite workers engaged in the same craft or labour specialisation. These may include, for instance, locomotive engineers, hand or machine typesetters (linotypists), rotary press operators, men’s tailors, and others...
• Industry Associations, which encompass all workers employed within a particular sector of production. For example, in the wool spinning and weaving industry, such associations may incorporate both male and female workers, ranging from unskilled labourers to spinners, weavers, printers, and finishers. Here, the defining criterion is not the nature of the work performed but rather the industry to which the worker belongs.
• General Associations, which aggregate workers from diverse industries and occupational categories.

Trade associations represent the oldest and most firmly established form of workers’ organisation. They are often characterised by a strong degree of exclusivity, particularly in relation to the conditions of entry into the trade. By contrast, industry and general associations are more recent developments, typically capable of mobilising large numbers of workers under their banner with remarkable rapidity. However, they are prone to significant defections in the event of organisational setbacks. A notable example of this phenomenon is the rise of the Congress of Industrial Organizations (C.I.O.) in opposition to the long-established and more differentiated American Federation of Labor (A.F.L.).

In the Anglo-Saxon nations, the trade (or craft) association retain considerable significance. By contrast, on the European continent, the dominant forms of workers' associations were the industrial and general leagues, which frequently operated under the designation of chambers of labour. Although this term more properly referred to the physical premises housing various trade and industrial associations, their co-location fostered a spirit of generality and class solidarity. This characteristic stood in contrast to the more insular and trade-specific nature of the older craft-based leagues.

d) The Diversity of Organisational Forms and the Principle of Voluntary Association

The multiplicity of organisational structures, coupled with the principle of free association, largely obviated the issue of formal classification. Workers and employers, being under no legal compulsion to join a specific organisation, retained the liberty to affiliate with the league they deemed most suitable for the protection of their interests—whether a trade-based, industry-specific, or general association. Furthermore, it was not uncommon for individuals to hold concurrent memberships in multiple leagues. This remains the prevailing practice today, particularly in Anglo-Saxon countries. In continental Europe, however, a different tendency emerged, influenced in part by the legalistic orientation of certain labour movement leaders, many of whom originated from the bourgeoisie—an attribute far less pronounced in the Anglo-Saxon tradition. Even before 1914, this mindset fostered efforts to extend organisational membership to the entire workforce, with proposals that employers should deduct union dues directly from wages via the payroll system. Had this approach been universally adopted, it would have inevitably necessitated a formalised system of classification, determining which league was entitled to receive the dues collected from all factory employees. However, at this early stage, most players resisted to compulsory enrolment.

e) Initially emerging as localised associations, workers’ leagues soon recognised the necessity of federating with neighbouring organisations to extend gradually their sphere of influence across broader constituencies.

This expansion was closely intertwined with the parallel organisation of employers’ associations formed in response to the growing strength of workers' leagues. If, for instance, a local trade union were established to safeguard the interests of textile workers in a suburb of Biella, it might initially adopt a strategy of successive targeted strikes in the single production sites, wherein workers employed in active factories would provide financial support to those on strike in another establishment. By employing this tactic, the union could systematically overcome individual employers in isolation. However, such a manoeuvre ceased to be effective once employers, recognising their vulnerability, organised themselves into collective associations and retaliated by enforcing industry-wide lockouts, thereby neutralising the on-off unions’ strategy.

In response, workers escalated their efforts by federating their local leagues with others across the entire Biella region, replicating their original approach at a broader scale—whereby striking workers in one locality were supported by those still employed in other areas. Employers, in turn, countered by forming provincial federations, further consolidating their collective strength. Through this dynamic interplay of labour organisation and employer coordination, progressively larger federative structures emerged. Over time, provincial, regional, and ultimately national federations took shape on both sides, culminating in the formation of powerful confederations of workers' leagues and industrial employers’ associations.

f) This process of organisational expansion is accompanied by a parallel development that may be described as the rationalisation of industrial disputes.

When labour conflicts are localised, confined to a single factory within a town or village, they are often highly emotive in nature, shaped by personal grievances and immediate sentiment. Strikes may be precipitated by a spontaneous surge of dissatisfaction or the fervour stirred by the rhetoric of an impassioned political agitator. The perceived risk is minimal, as striking workers anticipate solidarity and material support from colleagues still employed in other local establishments. Even in the event of failure, the consequences typically extend only to a handful of prominent agitators, who may face dismissal and subsequent relocation to a more accommodating locality.

However, as the scale of industrial action expands, the decision to strike is no longer taken impulsively at a mass meeting but rather deliberated upon with increasing prudence and procedural rigour. The process unfolds through successive consultations, from the council of the local league to the provincial federation, and subsequently to the regional and national bodies. Where necessary, a referendum may be conducted among union members to ascertain collective support. Such a decision necessitates a substantive justification, for it now carries far-reaching implications beyond the immediate locality. The grounds for dispute must be compelling, and the timing strategically opportune, as the federation councils weigh the merits of mobilising the collective resources of the organisation. This includes drawing upon financial reserves accumulated over years of contributions, prudently set aside through the voluntary dues of members. These funds represent not merely a strike contingency but also serve essential union functions, such as subsidising unemployed workers seeking employment elsewhere, providing assistance for illness or personal misfortune, and covering expenditures not encompassed by statutory welfare provisions. Additionally, they ensure the continued operation and maintenance of the league’s administrative framework.

As soon as the workers’ league ceased to be a purely local entity, sustained by the voluntary efforts of dedicated comrades during their evening hours or Sundays off, and instead evolved into a provincial, regional, or national organisation, the necessity of a permanent administrative structure became apparent. This was not to be a bureaucracy of detached functionaries, appointed through competitive examination and indifferent to the league’s objectives, but rather an assembly of distinguished representatives, drawn from among the ranks of their fellow workers—those who had laboured in mines, workshops, factories, and fields, now entrusted to advocate for their cause in the political and economic centres of decision-making together with pair fellows coming from other sites.

These individuals were not necessarily the most charismatic orators, but often were they the most persuasive and strategically apt figures, those whom the workers themselves deemed most competent in matters of collective resistance. Leadership within such organisations required sustenance, and thus, these representatives received remuneration from the league’s financial reserves. It became imperative, therefore, that such funds were preserved and judiciously allocated, rather than squandered on fruitless agitations or unrealistic pursuits beyond the realm of practical possibility. Almost imperceptibly, the pure agitator found himself compelled to exercise restraint. He realised that fervour alone was insufficient to secure tangible gains in matters of working hours, wages, and piecework rates. Political enthusiasm may suffice in an electoral campaign, but to negotiate the intricacies of piecework compensation, one must be well-versed in economic principles—understanding pricing mechanisms, cost structures, and the operational efficiency of machinery. The labour leader could no longer afford to be baffled when confronted by technical schematics, algebraic formulations, and complex economic equations presented by the employers’ secretaries. Nor could he afford to be outmanoeuvred in discussions involving exchange rates and trade tariffs, which directly impacted international sales. In this new landscape of experts, trade-unionists must become top-experts, become more educated and more skilled than adversaries. Leadership now requires a paradigm shift—from agitators to tacticians, from Garibaldian revolutionaries to strategic commanders, capable of devising calculated manoeuvres akin to military strategists drafting battle plans in a general staff headquarters for guiding artillerymen capable of calculating trajectories for shots that must hit at a distance. A similar transformation unfolded on the employers' side. Even the most unyielding industrialists, who once adhered rigidly to the principle that “within my factory, I am the boss”, gradually conceded to the necessity of entrusting negotiations to experienced, wise and accommodative representatives, reluctant to engage in high-stakes gambles where all could be lost.

At this stage, the path is paved for negotiation, conciliation, and collective bargaining. While the right to wield instruments as strikes or lock-outs remains the extrema ratio in industrial confrontation, such measures are used only out of real necessity. The broader the scope of the dispute, the greater the necessity of considering the interests of third parties, those harmed by a discontinuation of labour activity hence affected by the conflict —employees of ancillary industries, consumers, suppliers, and retail merchants. When the dispute extends to the national level, these third parties multiply into vast multitudes, and their collective sentiment assumes a decisive influence in shaping the outcome. Their weight in the deliberations may ultimately compel both contending sides—should they prove incapable of reaching a settlement through direct negotiation—to submit the dispute to arbitration by an impartial third party, whose expertise and neutrality are mutually acknowledged. Crucially, however, such arbitration is not imposed by statutory decree nor enforced by autocratic fiat. Rather, it emerges from a shared recognition, deeply ingrained within both parties, of the untenability of inflicting undue hardship upon uninvolved multitudes—innocent bystanders caught in the collateral repercussions of a struggle, waged with unwavering conviction by adversaries who each perceive their cause as just and rightful.

53. Cross-National Variations

The trajectory of development outlined above found its most fully realised expression in pre-war England, where a trade-union bureaucracy had firmly established itself—one that continues, even today, to supply the Labour Party, now a party of government, with its most capable figures. This bureaucracy is composed of individuals drawn from the ranks of the working class, and it retains the unwavering loyalty of the workers, so long as the chosen leader remains steadfast in defending their moral and material interests. Unlike in systems prone to capricious electoral fluctuations, the English trade-union leader is an organiser-practitioner, secure in his position for life, provided he faithfully discharges his duties. The workers, possessing a deep-seated sense of fairness and loyalty, hesitate to cast aside those who have devoted years of their lives to the service of their cause, refusing to send them back to the mine, workshop, or plough once they have assumed the mantle of leadership.

Other nations, however, diverged significantly in their realisation of what might be termed the trade-unionist ideal:

• The United States of America, where social mobility and economic dynamism were, and remain, exceptionally high. Here, the same qualities of vigour and determination that enabled an individual to rise as a union leader could equally propel him towards more lucrative and enterprising pursuits—as a pioneer of new settlements, an agricultural innovator, or an industrial entrepreneur.
• Germany, where, shaped by the nation’s characteristic genius for organisation and by the intertwining of labour struggles with political movements, the labour leadership evolved into a highly bureaucratised political apparatus. The primary concern of this politicised trade-union elite was securing protective and social insurance legislation from the state and ensuring strict compliance to these laws. However, when the Weimar Republic succumbed to the forces of National Socialism, also the league-style over-institutionalised trade-union structure collapsed alongside it.
• France, where the highly fragmented production structure—with eight million independent entrepreneurs, artisans, and self-sufficient cultivators, compared to ten million wage-earning workers across commerce, agriculture, and industry—fostered among workers a persistent aspiration toward self-employment. This weakened their long-term commitment to trade-union membership. Furthermore, ideological divisions—between revolutionary socialists, Marxists, trade-unionists, communists, and Catholic factions—consumed - and is still consuming - much of the intellectual and organisational energy that, in England, would have been channelled by unassuming, hard-working trade unions leaders who would have prioritized immediate practical solutions.

Italy, despite sharing certain surface-level similarities with France's political instability, and despite the rhetorical clashes between reformist socialists, trade unionists, and social Catholics, as well as the continued economic significance of artisans, small businesses, and independent farmers, had, in its major urban and industrial centres and across the Po Valley’s agricultural landscape, reached a notable level of trade-union especially by means of the production, consumption and labour cooperatives. The workers' leagues and the associated movement of production cooperatives had established a foundation that, had it not been disrupted by the political turbulence of 1919–1921 and the subsequent reactionary response, could have paved the way for the emergence of a robust and pragmatic framework of labour-management negotiation. This, in turn, held the potential to foster a class of skilled organisers—both among workers and employers—capable of resolving industrial disputes through compromise-based solutions that would not have been inferior in flexibility and technical sophistication to those practiced in the more advanced Anglo-Saxon economies.

54. The Corporatist Trade Union System

The structure of the corporatist order established in Italy through the Labour Charter of April 1926 and subsequent laws differed significantly from the trade union landscape prior to 1922. This one had largely departed from the guild-based corporatism of the medieval era. If any affinity, this one laid closer to the state-controlled corporations of the 17th and 18th centuries. This resemblance unwittingly stemmed from the same spiritual: the centralized bureaucratic monarchy of the modern era and the totalitarian framework of contemporary dictatorial governments.

At face value, the Labour Charter upheld the principle of trade union freedom—workers and employers were free to associate or refrain from association, and to form and join unions of their choosing. This formal declaration helped Italy’s fascist-era unions gain recognition in the councils and assemblies of the International Labour Office in Geneva, a privilege initially denied on the grounds that these organizations were not regarded as true representatives of the working class. However, in practice:

• Only adherents of fascist ideology were permitted to form and join workers’ and employers’ unions. The sole exception was Rinaldo Rigola - a member of the Chamber of Deputies - who was personally allowed to maintain the “Association for the Study of Labour Problems” and publish a modest journal, “The Problems of Labour”, in Milan. However, these platforms were tolerated only as long as they extensively promoted and analyzed the corporatist policies and legal doctrines of the time. Even this limited academic space was eventually shut down.
• Each trade or industry was permitted only one legally recognized association, and that association had to be fascist in order to obtain official legal status and acquire legal personality under the law.
• The freedom not to associate was put to nought by the fact that trade unions did not emerge from genuine needs expressed by workers and employers. The existing trade unions—whether Catholic, socialist, or syndicalist—were fast dismantled so that new ones spread across the country not by bottom-up initiative, but through up to bottom expansion, even in regions where neither workers nor employers had previously sought to organize.
• The corporatist trade unions extended their influence far beyond their natural domain. Rather than strictly focusing on labor relations—the sphere in which workers and employers negotiate employment contracts—these unions expanded to include artisans whose natural counterparts are customers , professionals, and practitioners of liberal arts, for whom traditional labor contracts did not apply. In doing so, fascist trade unions effectively replaced long-standing professional rosters, such as the forensic and medical orders, which had previously upheld ethical standards and professional dignity within their respective fields.

In short, the corporatist trade union system encompassed the entire Italian working and productive population, instituted the following:

a) Compulsory membership for all Italians engaged in manual or intellectual work, whether self-employed or salaried. This mandatory membership led to the collection of compulsory contributions, enforced under tax regulations, which primarily funded trade union organizations. The majority of these funds flowed into the coffers of the two major joint confederations—one for workers and one for employers—covering sectors such as industry, agriculture, commerce, transport, banking and insurance, crafts, professional services, and the arts. These organizations managed vast budgets, sometimes reaching hundreds of millions of lire, subject to parliamentary oversight. They also supported a large bureaucracy, which operated alongside the government’s ministerial bureaucracy but, due to its perceived lack of career stability, was often more generously compensated, particularly at higher levels.

b) So-called voluntary membership. While everyone was automatically enrolled and required to pay compulsory dues, full membership was only granted upon application and provided the individual met moral and political requirements. This "voluntary" enrollment also required additional voluntary contributions. In practice, however, union membership was often a legal or de facto prerequisite for securing employment, professional appointments, or business opportunities. As a result, over time, most workers, employers, and professionals felt compelled to apply for membership, causing the number of actual members to nearly match the total number of enrolled individuals.

c) Compulsory membership logically entailed the necessity of classification, resembling in many ways the system of the declining corporations of the absolutist era. Since every worker and employer was obliged to contribute, it became essential to determine which union each individual had to give membership. This led to disputes reminiscent of the old rivalries among medieval guilds—such as the endless feuds between shoemaker and cobblers. For instance, a crucial debate arose: Were sharecroppers to be classified as workers or employers? Should they pay dues to the Confederation of Agricultural Workers or the Confederation of Farmers? Given that millions of people were affected, the issue was of significant importance. Ultimately, it was ruled that the manual labor aspect of sharecroppers' work outweighed their role as co-managers of agricultural enterprises. However, similar classification disputes arose frequently, requiring continuous intervention and compromise.

Like other disputes, these were often settled based on political considerations. In principle, legal mechanisms should have provided mediation. The law established that only "recognized" trade unions—while technically allowing for free unions with no legal personality, which never materialized—held legal status and thus the exclusive right to represent all workers, regardless of whether they were union members.

Furthermore, employment conditions could not be negotiated through private agreements, except in cases where an individual contract granted better terms for the worker than those set by the collective agreement. These collective agreements could only be signed by officially recognized unions; once approved and published according to legal procedures, they became binding for all workers and employers in the relevant industry, trade, art or profession.

In the case of arts and professions, where traditional labor disputes were absent—as conflicts arose not between workers and employers but between professionals and their clients—these types of disputes went beyond that legal framework - hence corporatist unions took on a different role. They worked to establish fixed tariffs for professional services, which clients were obliged to accept.

If the trade unions or their opposing federations and confederations failed to reach an agreement, the dispute could be referred to the labor court—a special section of the Court of Appeal. The president of the court appointed a panel of experts from a joint list the very president drafted and updated annually based on nominations from trade union representatives.

While individual disputes—those arising from conflicting interpretations of existing laws and collective agreements—were frequently brought before the labor courts, cases concerning new disagreements over the terms of a collective agreement were far rarer. These disputes were often resolved before reaching the court as the parties reached some form of agreement.

However, not trough the meeting of two opposing wills or through genuine collective bargaining, as had been the case in the earlier trade union system, but rather through top-down imposition.

55. How Corporate Unionism Became a Branch of Public Administration

This was primarily due to the peculiar nature of these so-called trade union representations. A genuine workers’ or employers’ union—or league—is, by its very nature, a spontaneous formation. Workers first gather informally—at a tavern, in the town square, and later in a labor hall, a building funded by the workers themselves, formerly known as the Chamber of Labour, as outlined above. Industrialists follow a similar path—first meeting at restaurants, then in private clubs, and finally in special associations. In both cases, leaders emerge organically—chosen through an act of spontaneous trust, not rigid election schedules. Choice, not election on a fixed date; and if regular elections are held, it is pure form. These leaders rise from within—from the ranks of workers or industrialists themselves—and remain in office only as long as they retain the trust of their peers. Or until that same trust promotes them to higher posts, as secretaries or presidents of the provincial, then regional and then national federation. Election is merely a means of openly manifesting or confirming a mandate of trust, which must persist at all times if the union or league is to live. If trust is lacking; the trustee no longer puts passion, enthusiasm, work, study into the daily task, and the trust falls away, members no longer pay dues. A stagnant league quickly loses relevance, and when a new labor dispute arises, it collapses entirely—a clear signal that the battle has already been lost. When this happens, another league, with more dedicated and energetic leadership, takes its place—perhaps shifting in character: a trade union replaces an industrial league, or a socialist league gives way to a Catholic or a trade unionist one.

Rather, the Italian corporatist system, formally enshrined the principle that persons bestowed an official role in trade unions had to be elected by members; Those elected in the lower ranks would the provincial secretaries and presidents and on up to the supreme posts of the national confederations. In practice, however, this principles remained a dead letter. When members were summoned, it was often only to hear the reading of pre-selected names, which were then "unanimously approved" by a show of hands. But these names came from above, dictated by the authorities, the so-called hierarchies.

In short, the unions were not truly unions—they were branches of the central government, structured in the same bureaucratic manner as ministries, prefectures, police headquarters, and local podestà posts. The Head of Government himself selected and appointed the presidents of the confederations and the top officials. From there, the hierarchy cascaded downward: the high-ranking officials selected the lower-ranking ones, who, in turn, appointed the minor functionaries. There was no spontaneous leadership recruited from within the workforce or the industrial sector—no recognition of secretaries or a presidents - i.e. leaders - because they had earned the workers' trust, because they had been able to convince them best, because they had expressed their best conscious will more appropriately , because they had led them to victory or even to honourable defeat. Nothing of all this. In fascist or corporative trade unions, staff recruitment mirrored that of any public administration: through public competitions sometimes, and more often than not through party connections, personal recommendations, and loyalty to the regime. The trade union offices were staffed by law and economy graduates, agronomists, accountants, knights and commanders [Cavalieri del lavoro e commendatori tn], and bureaucrats where one would have expected to find men, if not in overalls or blouses and with calloused hands, at least accustomed to language other than the usual bureaucratic one. Even the clerks behind the counters were indistinguishable from those in a post office. Thus, these so-called trade unions were nothing more than instruments of the totalitarian state, recording and enforcing the will of the “boss”. They had now become an instrument of the government which gradually reduced independent classes into to dependent ones. Over time, even traditionally independent classes—industrialists, merchants, farmers, professionals, artisans, and workers—were reduced to mere dependents of the state. Within this corporatist regime, these same classes no longer had the freedom to negotiate prices, manage wages, or organize production as they saw fit. Instead, through a whole set of obligations: place their own goods in the state-controlled storage facilities, quotas to obtain fuel and raw materials, public consortia which allocated chemical fertilisers and oil for the tractor and sulphur and copper sulphate for vine, trade union employment offices which assigned workers for fixed wages and imposed rigid labour conditions like forbidding even voluntary wage increases to those who deserve under threat of taking away the worker's work permit, the residence permit, these classes were obliged to work how and where he would not have. In this system, the individual—whether worker, merchant, or industrialist—ceased to be a free person with a free will. Hence, he no longer can make independent economic decisions without risking starvation thus he becoming a mere functionary, a servant of those in power.

The essence of the corporatist system lies in its fundamental transformation of a diverse and loose society of independent industrialists, farmers sovereign over their own land, merchants at liberty to assume entrepreneurial risk, and workers free to navigate between enterprises—each possessing a varying degree of resistance to external demands and the capacity to form associations in defence of their economic interests with their personal negotiating capabilities, free to manifest their opinion into a society effectively reduced to employees. Many bear this status in name, and still more in practice, regardless of whether they receive a real salary. They are employees because they are subordinated to the dictates of a superior authority, which determines the volume and method of production, the purchasing and selling prices and the wages to be received. Disobedience invites exclusion from basic necessities and revocation of the right to reside thus reviving the ancient mechanisms of servitude. In effect, disobedience leads to the denial of the material requisites for both labour and livelihood.

56. What was the sole modification to the corporatist trade union system that most considered essential following the regime’s collapse?

Following the collapse of the regime on 25 July 1943, whose preservation had been the principal objective of the corporatist trade union system, the prevailing—if not universally held—view among those engaged in addressing the matter within the newly emerging political parties was that a one singular alteration was required, and most did not think that any other characteristic had to be changed . Most contended that the system itself need not be dismantled, provided that its direction no longer emanated from above but instead derived its legitimacy and vitality from below. The proposed remedy lay in ensuring that workers, employers, artisans, and professionals could elect their trade union representatives at the local level through free and secret ballots, with these representatives, in turn, voting for the leadership of the higher federations and confederations. Elections were to be conducted on a proportional basis, thereby affording each political and economic inclination the opportunity to assert itself in accordance with its relative strength. What had hitherto functioned as an instrument of authoritarian control, dictated by appointments from above, would thus be transformed into an authentic organ of democratic representation through the the voting from the bottom.

57. The Analysis of the Effects of Corporatist Alliances Begins

A rigorous examination of this issue necessitates a return to foundational economic principles. Fundamentally, the inquiry concerns the impact exerted by both workers' and employers' associations in regulating labour relations. For the sake of clarity, the discussion will primarily focus on workers' organisations; however, the same considerations—subject only to adjustments reflecting the differing roles of the parties involved—apply equally to employers' associations engaged in negotiations over employment conditions. To maintain analytical simplicity, the discourse will centre on wage determination and its fluctuations, treating remuneration as a comprehensive proxy for overall working conditions. In reality, variations in hours worked, shifts, rest periods, career progression, job security, workplace hygiene, paid or unpaid leave, double salary or incentives, may, through appropriate economic adjustments, be expressed quantitatively as marginal increases or reductions in wages.

58. Wage Determination Under the Assumption of Perfect Competition

If we assume the absence of labour unions while presupposing that both workers and employers are free to negotiate independently—where each side consists of numerous participants, unrestricted in their ability to enter or exit the labour market at will, and capable of deferring negotiations without significant cost and upon their discernment—then we posit the existence of the well-known conditions of perfect competition in the labour market. This latter is qualified as follows: the wage will be established at a level where the quantity of labour demanded equals the quantity of labour supplied (each worker being equivalent to one or more units of labour according to the kind of work performed, to his acquired skill, to his natural intelligence, to the reality of his aptitudes, and henceforth speaking of workers we shall mean that corresponding to the unit according to which all other workers are valued according to their own coefficient of productivity);

• And since employers have an incentive to hire all units of labour for which the wage does not exceed the revenue derived from the sale of the output produced by that unit, after accounting for all non-wage costs—such as raw materials, fuel, overhead expenses, taxation, prevailing interest on capital, normal entrepreneurial profits to compensate for risk, and managerial remuneration.
• Furthermore, since each additional unit of labour contributes varying levels of productivity, entrepreneurs will continue to demand additional labour so long as the marginal product of each successive unit remains sufficient to cover its associated costs.
• and considering that this incentive persists until the point at which the marginal product of an additional unit of labour falls below its associated wage cost, at which juncture further employment ceases to be profitable.
• Thus, it is demonstrably established that, under conditions of equilibrium and assuming perfect competition, the wage rate equates to the net proceeds derived from the output of the last worker employed—the so-called marginal worker. Suppose there exist 100,000 workers (or labour units), and the net revenue generated by the first 80,000 workers amounts to 12 Lire (1914 value) per day per worker, while that of the subsequent 10,000 is 10 Lire, and that of the final 10,000 is 8 Lire. In such a scenario, the equilibrium wage will be 12 Lire if 80,000 workers are employed, 10 Lire if 90,000 are employed, and 8 Lire if the full 100,000 are engaged. This example, though simplified and hypothetical, serves to illustrate that the level of employment is a function of the prevailing wage rate, which, in turn, is determined by the marginal productivity of labour. However, the entrepreneur is unable to remunerate the first 80,000 workers at 12 Lire per day, the next 10,000 at 10 Lire, and the final 10,000 at 8 Lire, for the following reasons:

a) It is not possible to differentiate between workers (or labour units), for, in accordance with the principle of price uniformity, a single labour unit cannot be remunerated at 12 Lire in one instance, 10 Lire in another, and 8 Lire in a third. Under competitive conditions, the market would adjust such that the supply in the segment where 12 Lire is paid would increase substantially, while the supply in the segment where 8 Lire is offered would decrease significantly, thereby equalising the wage rates across the market.

b) Furthermore, it is not feasible to calculate a weighted average wage and pay it to all workers per head. This is because it would not be advantageous for the entrepreneur to remunerate the penultimate group at 11.40 Lire—when they generate only 10 Lire in revenue—or to similarly remunerate the final group at 11.40 Lire, despite their output being limited to a mere 8 Lire.

c) Furthermore, by the same law of price indifference, the price of each unit of the total product, assuming, for example, it is 24 Lire when the production derives solely from the first 80,000 workers, will fall to 20 Lire as production expands with the addition of the subsequent 10,000 workers, and will further decrease to 16 Lire with the inclusion of the final 10,000 workers. Thus, if 100,000 workers are employed, there remains no margin for the entrepreneur to pay a salary exceeding 8 Lire, once all other expenses have been accounted for. It is important to emphasise that by stating that 12, 10, and 8 Lire represent the equilibrium and market values for 80,000, 90,000, and 100,000 employees, respectively, nothing more is implied than that these are the market values, corresponding to the marginal productivity of the workers. Under the stipulated conditions, this represents the total amount that can be paid to the workers. Naturally, should the conditions change, and for instance:

• The workers change and their productivity varies, with values of 15, 12.50, and 10 for the respective groups,
• Other factors of production change, such as a reduction in the interest rate on capital from 5 to 3 percent, a decrease in entrepreneurial risks, improvements in organisational capability, greater machine productivity, or modifications in production and sales methods, the market values will also shift accordingly. This can be generally encapsulated by the notion that values—both real and monetary—rise in response to technical and economic advancements, the progress of innovations, and improvements in the organisation of the enterprise.

59. The Effects of the Workers' League on Free Competition

In this context, we examine the effects that a workers' league can have on the welfare of workers, whilst remaining within the parameters of the full competition hypothesis. This hypothesis assumes that the league does not seek to alter the conditions of supply in the labour market, which remains at the levels of 80,000, 90,000, or 100,000 workers. The league does not modify the wage from the equilibrium levels of 12, 10, and 8 lire, which, by the assumptions of the hypothesis, are the market values corresponding to these respective quantities of labour. Since the league cannot, by its inherent nature, influence the marginal productivity of the workers, it cannot alter the wages from their equilibrium position.

However, the league can facilitate the bargaining process, making it more efficient and less time-consuming, such that, assuming the employment of 100,000 workers and the marginal productivity of the last worker to be 8 lire per day, the market wage can be established at 8 lire. The league’s role is to reduce the frictions present in any market, which otherwise prevent the immediate achievement of equilibrium without incurring unnecessary costs.

Is it not the case that workers are generally aware that in some locations or industries, the demand for labour units is thriving, while in others it stagnates? The league, by centralising information, alerts the workers and assists in facilitating their movement from areas where the wage is depressed—due to an oversupply of workers, such as 6 lire per day—to areas where demand drives the wage higher, say 10 lire, ultimately equalising it to 8 lire. This is achieved by providing valuable information and offering travel subsidies to workers who might otherwise lack the financial means to relocate.

Workers, due to the limited scope of their personal knowledge, often confined to a small geographical area or specific industry, are typically unaware of the opportunities available in emerging sectors. The league, functioning as an information hub, enables easier transitions - if not for the older generation attached to their trade - for the younger generation into high-productivity industries, thereby helping to mitigate imbalances in supply and demand. In doing so, it reduces inefficiencies—both excesses and shortages—in production, and contributes to rectifying imperfections in the goods and services demanded in the market.

Would workers, constrained by the requirements of family life, be inclined to accept wages below the market equilibrium of 8 lire? It is true that such a deviation would be transient, for the resulting increase in demand for labour by entrepreneurs—who, at a wage of 7 lire, would find it advantageous to engage an additional 5,000 workers. However, since these additional workers would not exist, this would inevitably drive wages back to the equilibrium level of 8 lire. However, this process of adjustment may take weeks, months, or even years, due to the inherent frictions in the market. The workers’ league, by providing support that enables workers to defer immediate employment and lease their labour at a more favourable rate, accelerates the resolution of these frictions.

60. The Impact of the League in the Case of a Unilateral Monopoly by Either Employers or Employees

Were the objectives and outcomes of workers' leagues confined solely to the facilitation of employment and the mitigation of frictions in the labour market, they would amount to little more than the functions of a well-structured employment agency coupled with a robust mutual aid society. However, the ideological and emotional foundation upon which workers' leagues are established extends beyond mere economic coordination. In the lexicon of the working class, these motivations are encapsulated in the notions of resistance and conquest. Workers perceive themselves as victims of systemic power imbalances and economic injustice, prompting them to organise not merely for protection but also to assert their claims to higher economic and social standing. If we strip these sentiments of their emotive veneer and distil them to their fundamental economic essence, we encounter a classic instance of the theory of monopoly pricing. Workers operate under the belief that employers, when organised as a unified league, act as monopolists in the labour market, systematically driving wages down to subsistence levels—just sufficient to ensure the perpetuation the species and then of abundant labour supply.

Disregarding intentions and aspirations, which in economic analysis hold no determinative weight, we can assert that a monopolist employer—or a monopolistic employers’ league—seeks to hire that quantity of labour, or to offer that wage (the two determinations are alternative and equivalent), which maximises net profit. If empirical observation suggests that maximum profitability is achieved by engaging 80,000 workers to manufacture that given quantity of goods, then this will be the precise quantity of labour units demanded by the monopolist. In this scenario, the fact that the marginal productivity of the last employed worker out of the 80,000 is 8 lire is of no consequence; the monopolist employer or the employers’ league will impose a wage of 7 or even 6 lire, compelled by the competitive pressure exerted by an excess labour force of 20,000 unemployed workers willing to work at reduced rates will force the 80,000 employed to adapt willingly or not. The monopolist, however, cannot push wages below 6 lire without jeopardising the productive efficiency of the workforce to an extent that would negate the benefits of cost reduction. Thus, in this assumed scenario, 6 lire emerges as the wage floor dictated by monopolistic conditions in the labour market.

Now, let us consider a scenario in which it is not the employers or their league that holds monopolistic power, but rather the workers' league itself. In this case, the league operates as a monopolist representing all available workers, negotiating employment terms with numerous competing entrepreneurs. If the league faces no external constraints and acts solely to maximise the welfare of its members, its natural tendency will be to set wages or regulate the supply of labour to be offered by the league itself on the labour market in a manner that maximises its overall net gain. At what point does this occur? Clearly, it happens when the total sum of wages earned by employed workers reaches its highest possible value, after deducting any subsidies that the league must provide to those members who become unemployed as a consequence of its wage-setting strategy. To illustrate this further, we can expand upon the previous example.

• The total number of existing workers, all members of the league, is 100,000.
• The league considers and tests different wage levels: 8, 10, 12, 15, and 18 lire per day.
• At these wage levels, the number of workers demanded and employed by entrepreneurs would be 100,000, 90,000, 80,000, 70,000, and 60,000, respectively—resulting in 0, 10,000, 20,000, 30,000, and 40,000 unemployed workers.
• To maintain control over the labour supply, the league must collect part of the employed workers' wages as a subsidy to support the unemployed members, ensuring they accept the situation without re-entering the market.
• The league sets these unemployment subsidies as follows:
  • 6 lire per day when the wage is 10 lire,
  • 7 lire per day when the wage is 12 lire,
  • 9 lire per day when the wage is 15 lire,
  • 9.25 lire per day when the wage is 16 lire.

These subsidies increase as wages rise to prevent excessive disparity between employed workers' earnings and the amount received by the unemployed members of the league.

The league's convenience calculation will be as follows:

This calculation is purely illustrative and assumes an exceptional level of unity within the workers' league—something rarely observed, except in a few long-established trade unions with highly restrictive recruitment policies. However, our objective here is to analyze a purely theoretical extreme case. Under this scenario, the optimal strategy for the league is to maintain 30,000 unemployed workers, provide them with a daily subsidy of 9 lire, to achieve a target wage of 15 lire for employed workers. After deducting the necessary contributions to the unemployment fund, this results in a net daily wage of 11.14 lire for those employed. Raising the wage demand to 16 lire would not be beneficial for the league, as it would increase the number of unemployed workers to 40,000, making the subsidy fund unsustainable. In this case, the net wage for employed workers would drop to 9.83 lire per day, lower than the maximum achievable 11.14 lire.

In the scenario of a unilateral monopoly—whether by employers or workers—two distinct wage outcomes emerge.

If the employers hold the monopoly, the wage drops to 6 lire per day for the 80,000 employed workers, leaving 20,000 unemployed, dependent on public charity.

If the workers' league is the monopolist, wages rise to 15 lire per day for 70,000 employed workers. However, after deducting 3.86 lire to subsidize the 30,000 unemployed at 9 lire per day, the net wage received by the employed workers is 11.14 lire.

Both scenarios lead to outcomes often regarded as harmful being only partly economic but being above all political and moral. From an economic perspective, both reduce overall production, as forced unemployment of 20,000/30,000 affects not only workers but also other factors of production—such as machines, land - and additional workers ( blue or white collars, or managerial and executive) that would otherwise be engaged in ancillary industries under full employment. From a moral and political standpoint, both situations create large groups of unemployed individuals, who must be supported either by public aid or by the solidarity of their employed counterparts. This burden is sustained by a diminished pool of goods, compared to what would exist under full competition.

Furthermore, both employer and worker leagues tend to focus narrowly on their immediate objectives, disregarding the broader market consequences of their actions. Their strategies alter supply and demand, affect prices and the cost of living, and ultimately create economic ripple effects. However, they often assume that any negative impact on their own members is too minor to be a significant concern.

61. The Impact of Workers' Unions in a Bilateral Monopoly Scenario

(When Both Employers and Workers Operate as Monopolies)

What happens when monopoly power exists on both sides of the labour market—when both employers and workers form powerful, exclusive unions that negotiate against each other? In such a case, wages will be set somewhere between two opposing limits: the lowest rate of 6 lire, which is most advantageous for employers, and the highest rate of 15 lire, which represents the strongest bargaining position of the workers' monopoly. Where exactly the wage settles depends on the relative strength of each side in the negotiation. Some key factors that influence this balance include:

• The extent to which each union approaches a true monopoly. Are there dissenters—known as "blacklegs" in English-speaking countries and "scabs" in Italy—who weaken the solidarity of the workers' league? Has the employers’ union established complete control, or is it vulnerable to competition from new businesses willing to hire from the unemployed workforce? Do the high costs of entering the industry—such as acquiring land, securing water access, or finding other essential resources—discourage from attempting to break the employers' league monopoly? Are the barriers imposed by the workers' union on apprenticeships so rigid that businesses have no realistic hope of recruiting new workers outside the union? Is worker solidarity strong enough to prevent desperate unemployed individuals from undercutting wage demands tired of the handouts they receive and the forced idleness to which they are condemned? The answers to these questions will determine whether wages gravitate closer to the employers’ or the workers’ preferred levels.
• The financial reserves held by each side. The ability to sustain a prolonged standoff depends on resources. The union—whether of workers or employers—that possesses the larger financial reserves will have the advantage, as it can support its members for a longer period, ultimately shaping the outcome in its favor.
• Assessing losses of each counterpart in the event of a work stoppage. The workers’ union evaluates the financial implications of what could be called the “strike enterprise.” On the positive side of this balance sheet, they account for the expected gains—such as higher wages or improved working conditions—that victory might bring. On the negative side, they must factor in the wages lost during the strike and the depletion of the union’s financial reserves. The greater the net gain, the more aggressively the union will push for its demands. Similarly, the employers’ association conducts its own cost-benefit analysis. On the positive side, it calculates the savings from potentially lower wages, the ability to impose less favorable conditions on workers, or simply the success of resisting the union’s demands. On the negative side, it must account for losses due to unfulfilled orders, penalties for failing to meet contractual deadlines, interest on outstanding debts, banking fees, maintenance costs, security expenses, taxes, and other operational costs that continue even when production is halted.
• Beyond the financial calculations, the final decision in a labor dispute is shaped by how each side perceives the balance of gains and losses. These interpretations are influenced by the leaders of both leagues, who, whether consciously or not, factor in their own personal stakes in the outcome. For instance, a union leader assessing the impact of a potential defeat may consider not only the depletion of financial reserves but also how difficult it will be to rebuild them—especially if this affects their own position or compensation. Similarly, the leader of a well-established and financially stable federation is often inclined toward compromise. Preserving the union’s funds is crucial for fulfilling its broader institutional responsibilities, such as administration, mutual aid programs, unemployment support, and travel assistance for workers.
• Additionally, the course of negotiations is influenced by how well each side anticipates the other’s strategy.

In a competitive market, where numerous workers and entrepreneurs negotiate simultaneously, individual bargaining moves are too dispersed to be predicted or countered individually. Instead, each participant considers the overall market dynamics rather than the specific actions of others. However, in a two-party negotiation—much like in a game of chess—each side carefully strategizes its moves based on anticipated reactions from the opposing party. The assumption is that both sides will act as rationally as possible in response to each other. Success does not always favour one side consistently; rather, the outcome often depends on which party has the most skilled or strategic leadership at any given moment.

• The influence of third parties—especially public opinion—becomes increasingly significant as the scale of a labour dispute grows. In small conflicts involving a limited number of workers, external perceptions have minimal impact. However, when disputes escalate to involve thousands of workers and employers, their ripple effects extend far beyond the immediate parties. Suppliers and customers may face business disruptions, local shopkeepers might lose customers or hesitate to extend credit to striking workers, and municipal governments may be forced to provide aid to struggling families.

Public sentiment, shaped by both direct experiences and media coverage, can exert a powerful economic and moral influence. The way the broader community perceives the legitimacy of either side’s demands or resistance efforts can ultimately determine the outcome of the dispute, tilting victory in favor of the party that secures greater public support.

The impact of “public subsidies for unemployed workers” constitutes a significant determinant in wage-setting dynamics. While unemployment benefits are typically inapplicable to those who voluntarily abstain from work—such as striking workers—it has already been established (see Chapter II, Paragraph 43) that the prevailing wage level directly influences the quantum of employment. Consequently, a monopolistic workers’ trade unions, in its pursuit of an optimal wage rate, must consider not only the nominal wage but also the effective wage, net of the fiscal burden associated with subsidising the unemployed. Given that the proportion of unemployed workers rises as wages increase—thus expanding the fiscal outlay for unemployment relief—it becomes possible to delineate the threshold beyond which further wage augmentation ceases to be advantageous.

However, the calculus shifts when the financial burden of unemployment relief is not exclusively borne by the workers themselves but is instead distributed across employers and, more critically, the state via public unemployment insurance schemes, i.e. taxpayers. In such instances, unemployment ceases to be classified as voluntary, as it is no longer the direct consequence of a strike per se but rather the result of a deliberate wage policy enacted by the labour syndicate. This legal distinction renders such workers eligible for public unemployment benefits, thereby reducing the effective wage deduction that the trade unions must factor into its calculations. Since only the fraction of state-provided subsidies that falls upon the workers in the form of taxation represents a direct cost to them, this arrangement inherently incentivises the syndicate to escalate its wage demands.

62. Common and Conflicting Interests of Monopolistic Employers' and Workers' Leagues

When the aforementioned factors are taken into consideration, the two opposing monopolistic entities share certain common objectives:

• transfer as much of the cost of sustaining unemployed workers as possible onto third parties, primarily the state (i.e. taxpayers) to minimise the extent to which this expenditure erodes their respective net incomes, retaining only a minimal residual concern for its impact.
• Restricting the aggregate output of goods and services to be sold on the market to a level that, when multiplied by the prevailing price and net of all production costs, yields the highest possible net return. This net return—comprising both the total wage bill accruing to labour and the residual profit appropriated by capital.

However, any agreement to realise these common objectives is inherently contingent upon the condition that the division of the resulting surplus proceeds in a manner advantageous to both parties so that:

• the workers’ wage must exceed the remuneration paid under conditions of perfect competition.
• The entrepreneurs’ profit margin exceeds competitors’. Should either condition fail to materialise, the workers' unions would have no rational basis for restricting labour supply, and the employers' association would find no advantage in limiting the deployment of productive resources. The actual wage level will be determined by the relative bargaining power of each party, fluctuating between the minimum threshold most favourable to employers and the maximum level most beneficial to workers. Regardless of whether the final wage level approaches the upper bound preferred by labour, the lower bound preferred by capital, or some intermediate equilibrium, the resultant economic effects diverge substantially from those characteristic of a labour market operating under conditions of perfect competition.
• A legion of job seekers labour emerges, increasingly reliant on public finances for sustenance.
• The aggregate supply of goods and services available to consumers goes down.
• Rising prices compel certain consumers to forgo consumption altogether, while others are constrained to reduce their consumption levels.
• The industrial structure undergoes contraction, leading to a diminished scale of operations, thereby altering the demand for production inputs and reducing employment across interconnected sectors.
• The distribution of wealth is reconfigured, as an increasing share of the productive surplus accrues to monopolistic entities—both labour and capital—while a growing segment of the population is marginalised from the primary allocation of national income. This excluded group is compelled to subsist on secondary redistribution mechanisms, such as charitable assistance, state-funded unemployment benefits, and subsidies to declining enterprises. Additionally, they become reliant on public expenditures for makeshift employment schemes, artificially sustained military enlistment aimed at mitigating unemployment, and other state interventions designed to preempt social unrest arising from economic idleness.
• Simultaneously, economic rigidity and unpredictability of economic undertaking intensify, exacerbating social and political instability. These conditions elicit recurrent state intervention, which further entrenches structural inflexibility, impeding the economy’s adaptive capacity in response to technological progress and the evolving rational application of economic and technical innovations.

63. The Principle of the Collective Agreement and Its Economic Consequences

A more comprehensive assessment of the economic effects of workers’ leagues can be attained by examining the institution that these leagues regard as the most significant achievement of their protracted struggles—the collective agreement.

From an economic perspective, a “collective” agreement may be defined as the contractual arrangement negotiated between the workers’ league and the employers’ league, establishing a “shared framework” governing the conditions of employment. This framework encompasses various aspects, including wage levels, daily working hours, rest periods, entitlements to weekly and annual leave (whether paid or unpaid), job security in cases of illness, workplace accidents or disability, and the terms governing piecework remuneration, among other provisions. A fundamental characteristic of the collective agreement is the principle of the “common rule”. If we encapsulate all elements of the employment contract under the umbrella of “wage determination”, the common rule stipulates that wages must be standardised for all members of the league. No worker is permitted to receive remuneration below the established minimum, nor may any employer offer wages beneath this threshold. Wages may be fixed on a daily basis (e.g., 10 lire per day) or determined by piecework (e.g., x lire per 1,000 strokes of a wool-weaving loom).

Since a wage lower than 10 lire is forbidden, the economic consequence of this common rule is that workers whose marginal productivity falls below that prescribed minimum wage are effectively excluded from the labour market unless they enhance their productivity up to that threshold —whether through extended apprenticeship, greater diligence, or heightened efficiency. Second, only those entrepreneurs who possess the requisite managerial and organisational capacity to ensure that even the least productive worker generates output commensurate with the stipulated wage can sustain their operations. Entrepreneurs who, due to inefficiencies, are unable to maintain profitability while adhering to the collective 10 lire wage standard are inexorably driven out of the market due to the higher costs resulting from their lower capacity in relation to the market price. Thus, the collective agreement’s common rule functions as an instrument of economic selection, leading to the elimination of both sub-marginal workers and inefficient enterprises while compelling those with latent productive capacities to elevate their performance to meet the imposed standard.

The implicitly favourable assessment of the collective agreement must, however, be qualified by certain inherent limitations, which may be delineated as follows:

• Does it serve the collective economic interest to exclude from the labour market all those workers who, due to factors such as gender, advanced age, or irreversible physical or intellectual limitations, are unable to achieve the prescribed level of productivity but could nonetheless be gainfully employed at lower wage rates—perhaps at 9, 8, or even 7 lire? Does such a policy not amount, in essence, to a restrictive approach to production? Moreover, can the principle of production restriction be reconciled with the notion of collective economic welfare, irrespective of how their respective importance is weighed? In an era where demographic trends indicate an increasing proportion of elderly individuals relative to the young and those in their prime working years, does a rule that systematically excludes a growing segment of the population from productive employment truly align with the broader public interest?
• Is it aligned with the general economic interest to eliminate those entrepreneurs who, while unable to structure their enterprises in such a manner as to employ labour at a cost no greater than 10 lire, might nevertheless engage workers who would be capable of earning 10 lire in a conventionally organised enterprise? If such inefficiency stems from the incompetence of the entrepreneur, then the principle underlying this elimination does not appear detrimental. The market mechanisms of capital loss, credit contraction, and eventual bankruptcy merely affirm the entrepreneur’s lack of aptitude for proprietorship, even if he possesses the technical acumen suitable for managerial or supervisory roles. It is, in fact, beneficial—according to the tenets of a competitive economy (loss of capital, loans, bankruptcy) that he be guided towards some assignment more befitting his skills. However, the inability to sustain employment at the threshold of 10 lire may not solely derive from entrepreneurial shortcomings but rather from the inferior productivity of other factors of production. The business’s geographical location may be suboptimal—perhaps distant from urban centres, from raw material sources, or poorly connected to markets, to machinery repair facilities, and ancillary industries. From a purely economic standpoint, efficiency dictates that production should migrate from less favourable locations to more advantageous ones, reinforcing the tendency towards industrial concentration in large metropolitan areas, where economies of scale—both internal and external—are maximised. Nevertheless, different perspectives may lead to different conclusions. Entrepreneurs may accept a lower rate of return than the normal profit margin x, just as workers may willingly contenting themselves with 8 lire, in exchange for non-monetary benefits. These may include the social and cultural ties inherent in residing in a small town or rural village, the preservation of family traditions, the emotional attachment to familiar landscapes, and the sense of community fostered by longstanding relationships. Furthermore, they may perceive qualitative advantages in raising their children in such environments, where they believe educational and moral upbringing to be more favourable. Is it, therefore, in the collective economic interest for the common rule of the collective agreement to rigidly mandate a wage of 10 lire, disregarding these psychological and social dimensions of compensation? If, when accounting for both pecuniary remuneration and intangible benefits, both entrepreneurs and workers are willing to settle for a wage of 8 lire, should they not be permitted to do so? The reality remains that while such individuals subjectively value these non-economic factors at a worth of at least 2 lire, the common rule compels the entrepreneur to pay 10 lire in strict monetary terms. Consequently, under the competitive pressures of the market, he may find himself forced to exit the industry altogether. Is it aligned with the general economic interest that the common rule of the collective bargaining agreement should prioritise economically quantifiable benefits over those intangible advantages which, though not readily expressible in monetary terms—whether in lire, denarii, or other units of currency?
• Furthermore, does it serve the broader economic interest for the common rule to engender and reinforce within the worker’s consciousness an aversion to increasing output beyond the level sufficient to secure a wage of 10? Proponents of collective bargaining theory contend that this standard wage is merely a minimum threshold, beyond which both higher remuneration ought to be encouraged. However, both impartial economic observers and the workers themselves have attested to the fact that, in practice, the common norm frequently cultivates an entrenched belief that exceeding the effort required to earn 10 is not only unnecessary but, indeed, undesirable.

Two sentiments converge to reinforce this notion.

The first stems from the persistent fallacy of a “fixed volume of goods to be produced and sold”, which, in turn, implies a “fixed amount of labour required”. It is commonly believed that if, within a given period, the market can absorb 100,000 tonnes of a particular commodity, then at a per capita productivity of 100 tonnes, employment will be available for 1,000 workers. However, should productivity rise to 125 tonnes per worker, the number of workers required would ostensibly decline to 800, leaving 200 of their fellows redundant. The worker thus “feels” that he is to blame for 200 of his peers being unemployed. This premise, however, is fundamentally flawed, as the quantity of goods that can be produced and sold is not a static figure but rather a function of market price dynamics, the interplay of substitute and complementary goods, and the real monetary income of consumers. Consequently, the simplistic inference drawn by workers from this assumption is equally erroneous. Nevertheless, the idea persists, taking deep root in the workers’ consciousness and fostering an unwavering adherence to the common rule, which assumes the character of a moral imperative from which deviation appears both imprudent and unethical.

Secondly, it is true that in periods when entrepreneurial dominance prevailed, the common rule frequently served as a mechanism to extract uncompensated labour from workers. The determination of the wage norm—let us assume a rate of “10 lire per day” under a piecework system has often been predicated on the assumption that, given prevailing skill levels, technological conditions, and organisational structures, the vast majority of workers will be able to achieve that threshold by producing at a standardised rate (e.g., x lire per 1,000 shuttle strokes in textile manufacturing or y lire per tonne of coal mined and brought to the surface). Only a small minority of workers marked by too great a deviation from the median line earn less or more than 10 lire. In such cases, where the piecework rate has been fairly calibrated, the worker has no legitimate grievance, nor does he express discontent. However, there have been instances where the piecework baseline was deliberately set at a level achievable only by a small fraction of exceptionally skilled workers, leaving the majority unable to attain the standard wage except through excessive exertion and premature physical decline. In Italy, such exceptional workers have been colloquially termed "tiracollo", while in Soviet Russia, they have been glorified as "Stakhanovites", embodying an exaggerated ideal of overproductivity. From the reality of this exploitation, it becomes evident why workers' leagues today exercise stringent oversight in setting wage norms, ensuring that they correspond to a level of output attainable by the majority of workers under normal working conditions. Yet, this vigilance has also engendered a deep-seated suspicion towards any worker who exceeds the standard wage, as he is perceived as a class traitor, an instrument of entrepreneurial interests, and a threat to collective bargaining efforts. The reasoning is straightforward: when negotiating wage agreements, entrepreneurs can point to outliers—workers earning 12 or 15 lire—and argue that others should, with equal diligence, achieve similar earnings. The unions fear that such arguments will lead to a downward revision of the piecework base, reducing x to x minus m or y to y minus n, thereby undermining the established wage structure. Consequently, a worker may consciously restrain his output, even when capable of greater efficiency, in order to avoid becoming a catalyst for wage suppression among his fellows.

This does not constitute a definitive critique of the common standard but rather underscores the inherent complexities involved in its formulation.

The common rule engenders within the leadership of workers' leagues a deep-seated aversion not only to any mechanism that differentiates one worker from another but also to any initiative that fosters a closer affiliation between the worker and the enterprise, facilitating his advancement within the industrial hierarchy. At a later stage, we shall examine profit-sharing schemes and their various manifestations, including worker shareholding and participation in industrial management. At present, it suffices to observe that workers' leagues have traditionally opposed such modes of co-participation, viewing them as an attempt to transform the wage-earner into a quasi-partner of the entrepreneur. To partake in the profits of the enterprise or to engage in its management is, in the eyes of the workers' movement, tantamount to defection from the working class. It disrupts the united front, as certain workers begin to identify with the interests of the employer thus supporting their approach. Such workers are enticed to trade their birthright enshrined in the common rule of the collective agreement for a mere pittance of uncertain and fluctuating rewards of profit-sharing.

64. The Criterion of Alignment Between Trade Union Policy and the Collective Interest: The Maximisation of Employment for All Employable Workers

The role of the economist, whose objective is to analyse the consequences of human action, is not to pass moral judgment—whether in commendation or censure—upon the policies pursued by workers' leagues. Rather, it is to discern the empirical outcomes of such policies in various scenarios:

• (a) when the leagues intervene solely to rectify market imperfections, even within a framework of competition;
• (b) when they seek to establish a monopoly over the supply of labour, to the exclusive advantage of their members;
• (c) when, in the latter case, their actions must inevitably contend with the countervailing efforts of entrepreneurs, who attempt to monopolise the demand for labour;
• (d) when, in negotiating collective agreements, they calibrate the common standard to accommodate the diverse requirements of different worker groups—variations in age, skill, strength, and geographic location;
• (e) or when they fix the common standard in a manner that aligns with the productivity of only those workers capable of meeting specific minimum requirements, which may be inaccessible or objectionable to significant minority groups.

Our analysis has led to the conclusion that, in cases (a) and (d), the policies of the workers' leagues can, in principle, be deemed aligned with the collective interest. Conversely, in cases (b), (c), and (e), they are at odds with the broader social interest.

These conclusions rest upon an assessment of whether the leagues' actions support or oppose the fundamental economic factors that, on the one hand, promote competitive equilibrium, and on the other, foster monopolistic tendencies in the labour market.

Can we encapsulate in a single guiding principle the policy approach of workers’ leagues most conducive to the collective interest? It may be asserted that the optimal trade union policy—that which most closely aligns with the collective good—is the one whose ultimate effect is the full employment of all employable workers capable.

If the total number of employable workers stands at 100,000, then the optimal policy—that is, the common rule of the collective agreement that ensures entrepreneurs have an economic incentive to employ all 100,000 workers—is one that aligns with the collective interest. Conversely, any policy that discourages employers from utilising the full potential of the labour force is contrary to the collective interest. However, the phrase all employable workers must be understood with reference to employability factors that can be influenced by trade union action. If, for instance, an extraordinary economic crisis were to reduce the number of workers that entrepreneurs can absorb from 100,000 to 50,000, the remedy would not necessarily lie in a progressive reduction of the common standard—from 10 lire to 8, then to 6, and perhaps even to 4 lire—in the expectation that this would stimulate demand and restore employment levels to 100,000. The determinants of labour demand are far too complex and multifaceted for such a simplistic mechanism to be effective. Indeed, such a reduction in wages might even prove counterproductive, particularly if the industry in question produces goods consumed by the workers themselves, as diminished purchasing power could further depress demand. The resolution of such delicate and intricate problems rests upon the strategic acumen of the leaders of both workers' and employers' leagues. Their success or failure, and the extent to which their policies align with the collective interest, hinges significantly on their ability to interpret and anticipate market uncertainties. By skillfully adapting their policies to evolving economic conditions, they may accelerate the achievement of full employment with minimal friction, an outcome that might otherwise emerge only gradually and with greater difficulty in the imperfect markets - existing now in the real world - governed by the unfettered forces of supply and demand.

65. The Workers' League May Well Have Contributed to Increasing Worker Productivity

Is that all? Yes. In cases where its actions aligned with the collective interest, the league can legitimately claim not only to have accelerated the alignment of wages with the marginal productivity of the total employable workforce but also to have increased marginal productivity itself. Beyond merely hastening the rise of wages for agricultural labourers in Italy and the Lower Po Valley—from 1–2 lire per day between 1870 and 1880 to 3 lire, which, in a perfectly competitive market, should have already been the norm—it is plausible that the league helped push wages further, from 3 to 5 lire per day. This stemmed from a real increase in worker productivity, which in turn created an incentive for entrepreneurs to employ them at higher wages. As Vilfredo Pareto observed, the league did not, by its own intrinsic virtue, produce this effect—a result of such magnitude would be miraculous, and in economics, miracles do not exist. Instead, it had this effect indirectly, acting as a catalyst for social and economic uplift and transformation for labourer and worker masses. Before the advent of the league, peasants and labourers were not even aware of being human. Many viewed themselves as mere servants of the land who did not dare to ask for any improvement, believing that wages were fixed by immutable laws or by fate itself, against which resistance was futile. Within such a mindset, they had little choice but to work and produce only within the limits of the meagre remuneration they received. For the first time, they recognised themselves as men among men, individuals with value, provided they stood together. This newfound self-awareness produced change, not in the immediate time but gradually. It instilled in them the importance of literacy, the ability to discuss their own affairs. The young generations became different from their parents and grandparents. The myth of belonging to a class that could demand more because they laboured the land and worked in factories—gave them the power to work more effectively. In the course of their personal evolution, after they got the first wage increase - may have it been nothing more than a correction, a mere approximation of their true productivity - , yet with these modest gains, they ate better, dressed better, lived in healthier homes, and demanded longer periods of rest. Their physical health improved, their mental resilience strengthened, and they became more capable and efficient. They became better farmers, better workers. This transformation was not created by an intrinsic force rather embedded into trade unionism, in the association with comrades, in common action, in the new belief of being and being worth something: the league forged a new kind of worker, one who deserved and ultimately secured a higher wage

This is the league that upholds and aligns with the collective interest. Coexisting alongside it, yet often conflated with it, is another league—one that adheres to the fallacy of restriction, privilege, and monopoly, rooted in the erroneous notion of a fixed quantum of labour that must be apportioned among the fewest possible number of companions. The former, through the augmentation of wealth and the enhancement of both material and intellectual productivity, advances the condition of all workers. The latter, by engendering artificial scarcity, entrenches privilege for select groups at the expense of the disenfranchised, thereby relegating them to a pariah class. The former is the hallmark of a robust, progressive, and fair society; the latter, a catalyst for discontent, envy, and revolutionary upheaval. The economist, as a man, may well aspire for others to embrace the former and repudiate the latter. Yet, as a scholar of economy, he is bound to observe: these are the inexorable consequences of divergent economic paradigms. The choice, ultimately, rests with mankind.

66. The Deliberation Between Plurality and Singularity, Liberty and Compulsion in Trade Associations

We now turn to the legislative quandary that emerges across nations, including Italy: should the trade union framework inherited from the past ventennio be retained in its fundamental structure, with only a modification in the selection of leadership—electing representatives from below rather than appointing them from above—or should there be a reversion to the system in force prior to 28 October 1922? The pivotal questions thus arise: Should trade associations be pluralistic or singular in form? Should membership be a matter of free association or one of compulsory membership?

67. The Nature of Pluralistic and Voluntary Workers’ Leagues

The principle of plurality and voluntary association in workers’ leagues signifies that each worker retains the liberty to affiliate or abstain from membership, to select among various leagues according to personal preference, and to contribute financially solely to the chosen organisation for as long as he elects to remain a member. This model, long established in Anglo-Saxon nations and prevalent in countries where workers’ associations (trade unions) have enjoyed a secular, uninterrupted, and progressively solidified existence, has withstood the test of time and yielded enduring, substantive benefits for the labouring classes:

a) No elections are conducted under uniform legal statutes; rather, each league operates autonomously, governed by its own statutes and customary practices;

b) The secretary-director of the league is designated through the organic consensus of his fellow members—he is the most capable among them, their natural speaker and representative. His office is contingent upon the continued confidence of his peers, which seldom wanes save for grave cause. The members recognise that he has relinquished his former toil in the mine, the field, or the workshop to devote himself entirely to the league in order to negotiate on their behalf with employers. They are also aware that he has acquired a different set of occupational habits, rendering his return to manual labour impracticable. When he ages, his comrades ensure his transition to a more suitable or less strenuous post within the league or the federation, rather than casting him aside. Unlike municipal or national elections, where the object is to measure party strength, the imperative here is to uphold the trust placed in one who has dedicated his life to his comrades. If he has committed no error, fidelity to him is an obligation. Conversely, the secretary-director is cognisant that his position is sustained solely by the financial contributions of his comrades, deducted from their wages to maintain both the league and his office. He holds his position strictly in service to them and may retain it only so long as he continues to provide tangible utility. Should he lapse into complacency—should the league stagnate, fail to track market fluctuations, or neglect to secure improved conditions where feasible—his members will cease their contributions and migrate to a more dynamic and effective organisation. He cannot afford to be idle, nor can he engage in agitation for its own sake, for such recklessness would precipitate the league’s decline, the erosion of its membership, and the depletion of its resources. His mandate is to achieve substantive, positive outcomes, and experience has demonstrated that such results are attained not through perpetual strife, but through negotiation and compromise. While the ultimate recourse of industrial action—be it strike or lockout—is not wholly renounced, it remains a measure of last resort. As the commander of his cause, he bears the duty to preserve the well-being of his ranks rather than to lead them heedlessly into peril;

c) No matter how fervently he may endeavour, the organiser who seeks to establish a league merely for its own perpetuation, or to foment disputes as a means of securing adherents, will not succeed. Where employers and workers have already reached an agreement, where equitable wages are duly paid, and where no substantive grievances exist, a voluntary league does not emerge—or, if it does, it proves ephemeral. What justification is there for levying dues, inciting disputes, to artificially sustain an organisers’ group only? A trades union is conceived, endures, and flourishes only where it fulfils a legitimate economic function—where it renders tangible services to its members, where it facilitates competition among associations vying to serve the same constituency, and where it allows comparative evaluation between organisations operating in the same trade from which workers derived or would derive better results;

d) Even if he were so inclined, the organiser cannot indefinitely subsist on conflict and resistance alone. Over time, an adversarial posture fatigues the membership, engenders disillusionment, and proves untenable in lack of results against unaffordable costs. The rhetoric of perpetual struggle must ultimately yield to the pragmatism: negotiation, deliberation, and contractual agreement. The archetype of the fiery agitator, the orator, the strike leader gives way to that of the delegate, the negotiator—one adept in the art of discourse, capable of counterposing argument with argument, data with data. Such an individual, while possessing conviction, refrains from ostentatious displays of sentiment, preferring instead to engage in rational discussions of wages, piecework rates, production efficiencies, and mechanisation. His proficiency lies in demonstrating the feasibility of adjusting remuneration, piecework base, work schedules or rest shifts without precipitating industrial collapse. He counters the employer’s cost assessments—often derived from actual book numbers entered as liabilities in enterprises burdened by excessive expenditures—with equally actual data drawn from firms that have achieved superior cost efficiencies.

In doing so, he not only highlights the position of the other entrepreneurial party but also benefits its own party while simultaneously exerting a salutary pressure for progress his entrepreneurial part to the advantage of all players. Indeed, history attests to instances where, despite the prevailing principle that trade league leadership should emerge from the ranks of the working class, a form of meritocratic competition has taken root—analogous to civil service examinations for entry into state institutions. The Webbs’ studies document references to curricula encompassing civil and labour history, algebra and technical design, industrial and social legislation, as well as elements of public and private finance—subjects to which aspiring leaders of major federations were subjected as a test of competence. This trajectory of advancement was by no means exclusive to Anglo-Saxon economies. Senator Francesco Ruffini recounted to his confidants that, during his tenure as Rector of the University of Turin, he was once appointed president—thus the final arbiter—of a joint committee comprising delegates from both employers’ and workers’ leagues. Throughout the protracted and arduous deliberations conducted in his presence, he found himself struck by the intellectual agility of the workers, who reasoned with a sophistication akin to that of his legal colleagues at the Turin Faculty of Law. By contrast, the employer representatives appeared bound by traditionalist reflexes, reminding him of the university’s venerable porter, Talpone—a man of conservative disposition, valued as a repository of academic tradition and a frequent confidant of faculty members. Agile and expert the workers, traditionalist the entrepreneurs. Such was the aspiration, only partially fulfilled, of the Italian labour movement in the post-war era—an ambition pursued through missteps and uncertainties, though perhaps partially avoidable. Its ultimate function was to serve as a prod to an industrial class often too inclined to rest complacently upon its accumulated privileges.

68. The Nature of the Singular and Compulsory Workers’ League

Regrettably, within the workers’ movement itself, divergent tendencies emerged—forces intent on consolidating, through legislative intervention, the position attained through exertion and struggle. Even prior to the preceding war, influential voices arose from within the socialist-oriented workers’ leagues—unquestionably the most dominant at the time—advocating for the following measures:

• The exclusive right to represent labour in the Supreme Labour Council, thereby eliminating any participation from leagues of Catholic, trade unionist, or other ideological persuasions;
• The legal obligation for employers to deduct, directly from workers’ wages, the contributions payable to the league’s treasury—a measure explicitly intended to reinforce the strongest association, that of the socialist model. The impartial observer must acknowledge a recurring historical phenomenon: every institution that originates in, and is sustained by, the moral force of liberty is, upon attaining a position of dominance, invariably tempted to forsake the very principles that underpinned its ascent. It seeks, instead, to entrench its position through coercion, compulsion, privilege, and monopoly. Those who instituted the so-called corporatist regime deftly exploited this intrinsic human proclivity, positioning themselves as its executors and replacing:
• The freedom of association with compulsory enrolment in the league.
• The diversity, plurality, and organic spontaneity of trade associations with their enforced singularity and universality.

The consequences were manifest: both labour and capital alike found themselves subjected to a single centralised authority—one designed to consolidate and perpetuate its own dominion.

69. The Variation of Bottom-Up Elections within the Singular and Compulsory Workers’ League

Would the mere variation of elections from below instead of choice from above alter the fundamental principle? In essence, it would merely entail the application of electoral mechanisms, once utilised within municipal, provincial, and state administrative hierarchies, to the structure of trade union governance. Similarly to prior 1922, electors, organised into territorial constituencies, elected municipal and provincial councillors as well as parliamentary deputies. From among these elected representatives were subsequently appointed mayors and councils in municipalities, presidents and administrative councils in provinces, and councils of ministers in the state. Presidents and ministers in turn appointed, albeit with some nominal safeguards, but inevitably from above, the entire administrative hierarchy of central and local officials, from directors-general and prefects to ushers, thus ensuring the operation of municipal, provincial, and national governance. Similarly, under the proposed system, the electorate, now organised into professional constituencies, would be called upon to elect, either by majority vote or by proportional representation (as has been suggested), the leaders of both labour and capital.

These elected representatives would preside over a unified workers’ or employers’ league, which—following the precedent established during the corporatist period enforced during the ventennio —would claim exclusive authority over the entire economic class associated with a given trade or industry. This entity would negotiate collective agreements binding upon all participants, irrespective of whether they were registered members, jus like municipal, provincial, and parliamentary statutes were binding upon all citizens, irrespective of their status as electors. Differences of opinion may arise regarding the precise electoral process governing the leadership of provincial and regional federations—whether such appointments should derive from direct election within the broadest constituency or proceed via an intermediary tier, whereby provincial federations would be elected by local league representatives, and national federations by the leaders of provincial bodies. Regardless of the chosen mechanism, one certainty remains: the elected leadership would assume the prerogative of appointing, according to prescribed selection criteria and publicly established requisites, a bureaucratic cadre tasked with administering the machinery of professional representation. These officials—whether designated as administrators, officials, or otherwise—would bear responsibility for negotiating employment contracts, overseeing their enforcement, and inevitably intervening in industrial management and the regulation of labour relations.

It is of little consequence to assert that the mechanism thus devised would be agile, expeditious, and inspired by non-bureaucratic principles and benevolent intentions. In practice, such a system would entail the following transformations:

• a) In place of voluntary members, who, being free to withdraw their support and cease paying dues should the services rendered fail to meet their expectations, there would now be members compelled to remit contributions, necessarily enforceable by the tax authorities through coercive collection procedures;
• b) In place of leaders spontaneously chosen by the members of their respective leagues who could be replaced with no need of elections should they cease to fulfil the expectations of their comrades, there would now be elected officials, immutable save for predetermined electoral cycles, necessarily spaced at intervals of no less than a year, and subject, upon re-election, to the fluctuating temperaments of the electorate;
• c) In place of comrades who voluntarily assist league secretaries and standing presidents—often without remuneration, dedicating their evening hours to managing personal and direct relationships with members—there would now be salaried officials, stationed behind bureaucratic counters, engaged in the execution of formal procedures through printed forms and standardised forms;
• d) In place of living associations, whose vitality derives from the moral trust of their members—who contribute voluntarily but cease to do so the moment the league no longer satisfies a tangible necessity—there would now be public-law entities, sustained by compulsory taxation, persisting even against the will of their members and deriving their authority not from service rendered, but from their ability to impose obligations irrespective of demand;
• e) In place of a small number of leaders, retained only as necessity dictates, assisted by voluntary aides drawn from among the members themselves—many of whom serve without remuneration— would now emerge a salaried bureaucracy, financed through public levies, exhibiting all the inherent tendencies of bureaucratic institutions: self-perpetuation through unchecked expansion, the proclivity to generate ever-new responsibilities in order to justify an increasing lot of elected bosses or officials appointed upon public competitions, and the inexorable escalation of compulsorily extracted contributions.

To these inherent logical characteristics of the system—one that some seek to perpetuate under the illusion that it may be reformed through the mere introduction of elective principles at its foundation—one must submit, just as one submits to the necessity of municipal, provincial, and state institutions, if indeed the proposed objective were truly beneficial to the community. However, the foregoing analysis has demonstrated that leagues yield beneficial outcomes only when their purpose is to adjust wages and other conditions of employment to the levels that would naturally emerge under conditions of perfect competition, and when they simultaneously endeavour to elevate the working man by instilling in him an awareness of his moral worth, thereby conferring upon him a newfound dignity of life. Such results are attainable solely through the free league, the voluntary and constructive endeavour of men united with their comrades—an association that not only enables them to will but also to achieve aims beyond the reach of the isolated individual. Conversely, the analysis has established that leagues generate deleterious effects in direct proportion to their approximation of the monopolistic model, wherein they seek to control both the supply and demand for labour. Nor are these adverse consequences mitigated by any potential collusion between opposing monopolies. The single and compulsory league, however, represents the most consummate embodiment of such monopolistic control—exercising absolute dominion over both the provision and procurement of labour. Moreover, its monopolistic nature is rendered yet more formidable by the coercive authority it wields to exact contributions, even from those who resist its imposition.

It is thus conclusively demonstrated that, whereas the voluntary and pluralistic league may serve as a vehicle for the moral and material advancement of the working classes, the single and compulsory league inevitably degenerates into an instrument of oppression—an unwitting but assured mechanism for the perpetuation, or the insidious restoration, of an authoritarian and totalitarian state.

Chapter IV: Participation in Profits

70. Why is Profit Sharing Examined Rather than Other Forms of Worker Participation in Enterprise Management?

Through social insurance, the worker seeks to secure a minimum standard of subsistence in all circumstances where the normal source of income—labour—is disrupted or lost due to accident, disability, old age, illness, unemployment, or the normal source of income, which is labour, is rendered deficient by family burdens. The objective that was initially pursued through mutual aid, relying solely on the concerted efforts of the associated workers themselves, is now sought through legally mandated contributions from the worker, the employer, and, on behalf of the broader community of taxpayers, the state.

Through association—typically voluntary and pluralistic, though in certain states and historical periods rendered compulsory and unitary—the worker enters into collective bargaining agreements with employers, whereby common standards governing labour conditions are established and uniformly observed by all members of the group. These agreements provide workers with a minimum standard working and living conditions.

These two institutions—insurance and association—thus serve distinct yet complementary functions, corresponding to the opposing conditions in a worker’s life: employment and non-employment.

However, beyond securing a minimum, man aspires to ascend. This advancement is pursued through a variety of means, not all of which need be examined here: through individual savings, which serve as a way out from the status of wage labourer through the establishment of a workshop, a commercial enterprise, or an industrial venture; through the acquisition of land, whether under cooperative cultivation, sharecropping, or leasehold tenure, culminating ultimately in private ownership. Economic advancement may also occur without direct entrepreneurial activity, as when a worker or salaried employee acquires residential property—whether through outright purchase or through partial payment supplemented by instalment-based financing. Such models have been widely adopted in Switzerland, while, in the interwar period, British building cooperatives successfully provided over one million owner-occupied homes under structured repayment schemes.

However, these are traditional avenues of social advancement, being well-established and widely recognized for their social benefits, do not tend to provoke significant controversy. The more contentious debates revolve around alternative, ostensibly modern, methods of worker elevation. One such approach advocates for the expropriation—either without compensation or with merely nominal restoration (denominated in a depreciating currency or calculated using criteria that substantially undervalue the seized assets)—of industrial plants, railways, and naval enterprises, followed by their subsequent management by technicians, employees, and workers.

Another approach seeks to prepare workers for future management through hands-on experience, effectively using internal factory boards to provide training. These boards, composed of technical employees and workers, would initially exercise oversight over industrial management—both as a safeguard for labour interests and as a means of acquiring precise knowledge of production costs and methods, procurement and sales strategies, and pricing mechanisms. The ultimate objective would be to render workers capable of both participating in industrial decision-making and eventually assuming full managerial control in place of current owners. Since this lecture aims to analyze existing economic structures, it would be less appropriate to dwell on proposals that are predominantly aspirational. Economics is not a science of what ought to be—a domain more suited to moral philosophy and political theory—but rather a discipline that examines what is[12]. It deconstructs observed realities into fundamental components to better assess the potential consequences of proposed reforms. However, such analyses must be grounded in tangible, verifiable phenomena. At present, the concepts of worker-led expropriation and internal management boards remain largely speculative, making them difficult subjects for rigorous economic evaluation.

Excluding the Russian experiment, whose actual economic and social mechanics remain insufficiently understood for meaningful legal and economic scrutiny, there exist three worker-driven social experiments—conducted either independently or with employer collaboration—about which we possess sufficiently reliable data to facilitate substantive economic analysis:

• Profit sharing;
• Worker shareholding;
• Production cooperatives.

Given the time constraints, a comprehensive study of all three experiments actually carried out over a long period of time and a fairly large number of cases is impractical. Instead, I shall focus on profit sharing, which is not only the subject of contemporary proposals for large-scale mandatory implementation but also offers insights that may prove useful in forming preliminary assessments of the other two models.

Here’s your refined version of the passage, maintaining its depth while improving clarity and readability:

71. Bibliographical and Historical Notes

The concept of profit sharing benefits, first and foremost, from a long and well-documented history[13]. Its origins can be traced back to ancient agricultural practices, where, in its simplest form, it was applied through sharecropping and other systems that allowed peasants to partake in the land’s yield. Similarly, in the fishing industry, the traditional division of catches into fixed portions among boat owners and sailors represents another early form of profit-sharing. Even when limiting the discussion to its applications in industry, commerce, and finance, the idea has notable historical precedents. One of the earliest significant documents on the subject is a Napoleonic decree, issued from Moscow headquarters on October 15, 1812, which established a system for sharing net profits of the Théâtre Français with actors of the Comédie française. Under this decree, actors received not only a fixed annual stipend, supplemented by feux (a performance-based bonus), but also a portion of the theater’s net profits at the end of each financial year. The profits were divided into 24 shares, allocated as follows:

• 1 share allocated as provision for incidental expenses;
• ½ share allocated to theater renovations and improvements
• ½ share contributed to a pension fund
• 22 shares distributed among the sociétaire actors, based on their status and experience—ranging from ⅛ of a share for younger lesser-known sociétaires performers to a full share for the most celebrated and senior actors.

The payments were structured so that half was disbursed immediately in cash, while the other half was deposited into a pension fund for the actors’ future security.

Among the better-known and still-existing examples of profit-sharing, several stand out:

• Maison Leclaire (established in 1842) and the Guise Family College (founded by Jean-Baptiste Godin in 1876)—both of which evolved from the utopian socialist ideals of Saint-Simon and Fourier, dominant in 19th-century France, into fully functioning worker and production cooperatives;
• The Bon Marché and La Samaritaine department stores, where the owners generously transferred both ownership and management to employees and workers;
• Michelin (founded in 1898), where the employer discretionarily decided of the amount and allocation of the profit share to employees.

72. Definition and Essential Requirements for Participation

To understand profit sharing, we must analyze how it has evolved over the past centuries. The most fitting definition comes from the French Higher Council of Labour, given during its session in November 1923:

“Profit sharing is a contract by which the employer commits to distributing, in addition to the normal wage, a portion of the net profits among the employees of the enterprise, without requiring them to share in any losses.”

From this definition, the essential requirements for profit sharing emerge as follows:

• a) It is based on a voluntary agreement – whether explicit or implicit, profit-sharing arrangements arise from a mutual agreement between the employer and the employees. Historically, there are no sustained examples of compulsory profit-sharing systems imposed by law on a general scale, or at least there are no known examples of general compulsory participation applied for appreciably extended periods of time;
• b) Profit-shares are paid as an addition to the normal wage, i.e. the worker’s standard earnings determined by market conditions, established customs, or trade union agreements. Thus, arrangements like sharecropping—where a portion of the yield serves as the worker’s primary wage—do not qualify as true profit-sharing;
• c) The worker's share is derived from the net profits - if any - earned by the company over a specified period of time;
• d) It applies only to profits, not losses – In a profit-sharing system, employees do not stand as full business partners. They do not share business risk in all contingencies. They are quasi-partners who intervene if and when profits are made. In the event of a loss, when ordinary shareholding is not sufficient to cover them, privileged shareholders will have to cover the deficit. In contrast, employees shall never contribute toward covering company losses.

73. Types of Participation

If profit-sharing means granting workers a share of a company’s profits, then there are as many types of enterprises the worker is called to share profits. A business may be considered as a whole or divided into sub-enterprises, each with its own economic autonomy. Setting aside cases where it is not a real profit-sharing as sharecropping, a fisherman’s share, a shop assistant’s commission on sales, or annual bonuses for insurance agents, the main types of participation can be classified as follows:

• a) The enterprise consists of the performance of a specific task entrusted to the individual worker or more frequently to a group of workers. A Maison Leclaire report, a company that also applies profit-sharing at the corporate level, describes this system as follows: “A special contract allows the team that has completed a job to determine whether it has achieved a satisfactory result. We know exactly, at the end of a project, how much labour and raw material have been used. The measurer evaluates the figures, makes calculations, prepares a report, and immediately determines the profit obtained. This motivates workers and enables us to generate profits.” This system ensures that workers receive a direct share of the profits they have helped to produce, without interference from the performance of other teams or departments which may be negative. The worker’s financial risk is confined to the outcome of a single project.
• b) Profit-sharing may extend to a specific department within a factory or an individual plant in a larger industrial complex. A cotton factory can processes raw material from its initial intake to its final sale as finished fabric for wholesale outlet. The production cycle can be divided into separate stages—such as spinning, twisting, dyeing, and finishing—with each department functioning as an independent unit. Each department receives raw or semi-finished materials from the previous stage to process them and deliver the output to the successive stage. Incoming and outgoing prices are pre-determined internally by the general management rather than set by the market. Profit available for distribution can be termed as industrial profit derived from the difference between the cost upon material incoming in a department, plus processing and overhead costs, and and outgoing to the next stage of production. Both prices are set for accounting purposes rather than reflecting actual market prices. Employees and workers are concerned solely with maximising industrial profit. What happens to the finished goods once they move from the industrial departments to the sales office is outside their scope of calculation. It is entirely possible for individual departments to generate a certain level of divisible profit, while the company as a whole achieves a different overall profit—or even incurs losses. This discrepancy arises because the actual selling price may differ from the price estimated by the sales office or the sales office must account for its own overhead costs, risks, bad debts, and other financial factors, which differ from those allocated to individual departments. However, workers do not bear the burden of losses from other departments, nor are they affected by overall company losses. As long as they have contributed effectively to the successful production of their own department, they remain eligible for a share in the profits—profits that cannot be nullified by inefficiency or poor performance in other departments.
• c) In some cases, profit-sharing applies to the company as a whole, both in its economic and legal sense. This is profit-sharing in the strictest sense which will be discussed here, and it is the only form considered in recent programmes and proposals that have emerged in Italy. Its structure, requirements, and challenges will therefore be examined in greater detail below.

74. Division of Profits

As stated in the definition, the system requires that a portion of the profits be allocated to the company's employees. But what portion should this be? A simple 50-50 split is certainly not a viable option. Even in sharecropping, this equal division often proves problematic. The uniformity of the share fails to account for differences in land productivity, meaning that in some cases, the same percentage is either more than sufficient or insufficient to fairly compensate the sharecropper's labour. To counteract this inherent inequality, various additional agreements have had to be devised. However, in industry, such inequality would be even more intolerable, as the relative importance of capital and labour varies significantly from case to case. Consider the division of profits in a coal, lignite, iron, or sulphur mine. In these industries, labour costs can constitute 80% to 90% of the total production cost. In such cases, assigning 50% of the net profit to labour would grossly undervalue its contribution while overvaluing capital. Conversely, take the example of an electricity production and distribution company supplying industrial users (excluding small-scale household distribution, which is typically handled by affiliated companies). In this case, capital investment runs into hundreds of millions or even billions of lire. However, once the power plants, artificial reservoirs, intake channels, and transformation plants are constructed, the company requires only a small workforce—sometimes just a few dozen technicians and workers. A 50-50 profit split here would result in exorbitant earnings for the few employees, far exceeding even the salaries of the highest-ranking civil servants. Thus, it is crucial that the division of profits is determined based on the true importance of capital and labour—measured according to uniform and consistent criteria. Therefore:

• a) On one hand, the invested capital is taken into account, while on the other, the capitalised value of the worker’s services is considered. This method, however, is rarely used as it involves complex calculations regarding the capitalisation of wages. Just as in the calculation of accident compensation, it requires assessing the worker’s probable future earnings, their expected remaining working life, the discounting of these future earnings to their present value. This calculation is essential because the entrepreneur’s invested capital must be compared to the worker’s invested capital, which is not merely their wages, but rather the economic value of their person.
• b) Given the complexity and uncertainty of such calculations, it is generally preferable to compare both interest on the capital invested by the employer together with the wages received by the workers. These two metrics are homogeneous, as they both represent income or remuneration for the two key production factors: capital and labour. For example, if in a given financial year, two companies A and B reported the following sums as interest on invested capital and wages paid to employees, respectively:

In Company A, 80% of the net profit is allocated to capital and 20% to labour, whereas in Company B, the distribution is reversed, with 20% allocated to capital and 80% to labour.

Once the labour share has been determined, it must then be distributed among different categories of workers. A clear distinction is always made between executives and employees. For instance, in the Guise family enterprise, 25% of the profits are allocated to what is termed capacity, with further allocations as follows: 4% to the Managing Director, 1% to each Board Member, but not exceeding 16% in total ,2% to the Supervisory Board, 2% at the Board's discretion to reward exceptional services, 1% for scholarships awarded to students from the schools set up by the entrepreneur family. In the Leclaire factory, 15% of the profits are allocated to the two executives. Similarly, in Le Bon Marché department store in Paris—where Aristide Boucicaut introduced profit-sharing in 1877—the distribution is: 2% for the Board of Directors, 14% for Managers, Assistant managers, and Senior Employees. At Samaritaine, another Parisian department store, its founder Ernest Cognacq allocated 15% to executives. Thus, a general principle emerges: the significant contribution of executives, administrators, and directors to the creation of profits is consistently recognised and rewarded.

The share allocated to employees is never divided into equal parts. Instead, various factors are considered, primarily the following:

• a) Annual salary or wage, supposing this is used as an indicator of the worker’s contribution to production;
• b) Seniority in the company, in the aim of rewarding employees who have demonstrated long-term commitment to the company. However, it is often criticised by workers’ associations, which view it as a means of tying workers to a single employer and undermining solidarity among colleagues;
• c) Job function — This factor underscores the allocation based on the worker’s role, increasing the share for those who, without being managers, hold positions of trust;
• d) Overtime or performance bonuses – Additional remuneration is considered an indicator of the employee’s industriousness and dedication.
• e) Family expenses – In the absence of family allowance funds, the profit share may be used to supplement salaries, providing additional financial support proportionate to family responsibilities. This approach is often intended to foster worker loyalty to the company.
• f) Individual merit – This criterion is based on the employer’s subjective assessment. Notably, Mr. Michelin, who introduced profit-sharing in his rubber factories in Clermont-Ferrand in 1898, expressed his aversion to fixed rules, explaining his aversion to fixed rule used to write:

**”In the early days, I observed that some workers formed a true elite. Their dedication had been invaluable to me at the beginning—during a period when difficulties far outweighed the benefits—so I resolved to reward them when better years arrived. Since they had worked more than they owed me for their pay, I thought it fair to give them more than their pay. That was the foundation of the partnership. I knew they genuinely cared about the success of the company, just as I did. They were committed to making the best tyre possible. They took great care to avoid waste—whether of materials or resources—and handled tools with skill, because they understood that therein laid a great reason for cost saving. They followed instructions with utmost attention, ensuring that their work was always carried out to the highest standard. If they believed that a process could be improved or a machine modified, they informed their superiors. They also reported any issues with tyres, canvases, or other raw materials. If they made a mistake, instead of hiding it and thinking, ‘It doesn’t matter, no one will notice,’ they reported it so that production would not suffer. To be a true participant in this system, one had to embody these qualities. I would like to say that if a man does not have all these qualities, if he fails to pay attention to his tasks, if he cuts corners, if he does not think: ‘I want my work to be well done’, he is not worthy of becoming or even remaining a participant. Some workers approached me, saying, ‘I have been with the company for six years, so I should be a participant.’ They were mistaken. Participation is not a reward for seniority. It is reserved for intelligent and conscientious individuals who dedicate their full efforts to ensuring that the Michelin tyre remains the best tyre in the world.”**

These statements from Michelin are particularly revealing, as they highlight the true essence of profit-sharing. It is not about simply giving workers a portion of the profits that have somehow emerged from the enterprise, but rather about recognising that those who have contributed to creating the profit have a rightful claim to their fair share. If this principle holds, then participation has a clear limit: a worker is entitled to receive only the profit that he has helped generate, and in proportion to his contribution.

It is also important to consider monopolistic cases, where participation cannot be restricted solely to employers and workers. In such instances, profit is derived, at least in part, from the company's monopoly position. If profit-sharing were confined to these two groups alone, it would resemble the division of spoils between accomplices in an act of plunder. Recognising this, legislators have intervened - as due - to prevent such exploitation of consumers. Where regulation exists, it ensures that, if profits are to be shared, the public interest takes precedence. For instance, the concession contracts of the gas company serving the southern districts of London stipulated that the South Metropolitan Gas Company was compelled to allocate its profits in a regulated manner. After paying a 5% return on common shares, the remaining profit were to be divided as follows: 75% used for price reductions to benefit gas consumers; 12.5% allocated to ordinary shareholders (excluding preferred shareholders, whose income is more secure); 12.5% distributed among participating employees and workers.

However, profit-sharing is conditional upon the gas price remaining below 11 pence per therm (the unit of measurement for gas). If the price reaches or exceeds 11 pence, no profit may be distributed at all. This regulation creates a shared incentive for both employers and workers to lower prices, prioritising the interests of consumers before their own. Nevertheless, even when prices are reduced, the monopolistic nature of the industry ensures that 75% of the profit benefits consumers, while only 25% is shared between employers and workers.

75. Allocation of the Share Due to Labour

Experiments conducted in this area indicate three main approaches.

76. Cash Payment

This approach is predominantly favoured in England and the United States, where the objective is to provide the worker with the tangible experience of directly receiving their rightful share of the profits. The employer refrains from assuming a paternalistic role in determining the optimal allocation of these earnings, instead entrusting the worker with personal discretion, guided by a sense of individual dignity and familial responsibility.

77. Deferred Remuneration with Capitalisation

On the other hand, some express their concern about workers who collect a substantial sum upon the approval of the company's financial accounts and then may be induced imprudent expenditure or suboptimal financial decisions by the worker, to the detriment of both themselves and their family. Consequently, they favour a system in which these earnings are capitalised for the worker’s future benefit by various means:

• The entry of the sum to an individual savings account, so that a provision is gradually built up, accessible only after a predetermined period has elapsed;
• The deposit of the sum into a dedicated account within a specialised fund to establish a life annuity, which, in certain cases, may be transferable to a spouse or dependent children;
• An hybrid solution which implements a combination of the above methods in varying proportions;
• The acquisition and holding of secure financial securities on behalf of the worker, with access granted under conditions specified above.

Each of these mechanisms shares the fundamental characteristic of being investments denominated in the national currency. From 1814 to 1914, such financial arrangements functioned with relative stability, underpinned by a historically unprecedented conviction that states had a vested interest in maintaining the intrinsic value of their monetary units—ensuring both the consistency of their weight and fineness, and thereby preserving purchasing power. During this era, a widespread belief emerged in the existence of some mythical abstraction they defined as restful investments predominantly comprising government bonds, land credit instruments, and mortgage-backed securities. However, the monetary devaluations that followed the events of 1914 brought men back to the normal historical reality that is monetary disorder, i.e. forgeries, now called currency devaluations. With only a few partial exceptions, very commendable even if partial only —chiefly Switzerland and certain Anglo-Saxon economies— no entirely secure investment vehicle remains. Even life insurance has been reduced to little more than a speculative wager on the future stability of the monetary unit.

Beyond the reasons previously outlined, capitalisation is sometimes favoured in the form of:

e) Acquisition of company shares or other assets of the enterprise where worker is admitted to profit participation. Such shares, unlike so-called restful securities, represent direct co-ownership in the firm’s tangible assets—commonly referred to as real values assets— inherently insulated from the erosive effects of monetary devaluation. Furthermore, these assets pertain to a business whose prosperity the worker has a vested interest in and whose operations they are intimately familiar with through their daily labour.

However, given that the foundational principle of profit-sharing dictates that workers should not bear the burden of corporate losses, measures are typically taken to shield them from financial downturns when investing their allocated profit shares. Consequently, employees are generally not offered common (ordinary) shares, which entitle their holders to a residual claim on earnings—that is, they receive whatever remains only after all expenses have been settled, reserve funds have been allocated, bondholders’ fixed interest payments have been met, dividends have been distributed to preferred shareholders, and compensation has been disbursed to directors and executives. In the event of liquidation, common shareholders are entitled to the total share of the company’s remaining assets, but only after all outstanding liabilities have been satisfied. While common shares have the potential to yield substantial dividends and appreciate significantly in value, they also carry the risk of yielding no returns at all and may even be rendered worthless. Given these inherent uncertainties, workers are generally remunerated with preferred stock, i.e. shares of the company’s assets that, while not yielding a fixed pre-established interest, grants its holders a variable dividend paid to preferred stock prior than ordinary shares. For instance, in a scenario where profits permit dividend disbursement where preferred shareholders may first receive a dividend up to 5%, if residual profits remain, ordinary shareholders may then receive a dividend up to 10%, then any surplus beyond these thresholds may either be distributed entirely to ordinary shareholders or apportioned between common and preferred shareholders, with preferential treatment given to ordinary shareholders, reflecting the greater financial risks they assume in exchange for the potential of higher returns.

The arrangement outlined above is commonly referred to as workers' shareholding.

However, it is not strictly necessary for employees to acquire shares in their company solely through the allocation of their entitled share of profits. Workers may also choose to invest their personal savings from other sources in company stock. Some have proposed that funds earmarked for severance pay or other employee entitlements be redirected toward share purchases. Naturally, share ownership grants workers the right to participate in general shareholders’ meetings, to vote, and to stand for election to the board of directors. In certain instances, it is customary to grant the collective body of worker-shareholders the privilege of independently electing one or several board members, who assume the same responsibilities as other directors.

However, a significant disadvantage of equity-based investment is that it inherently exposes workers to the risks associated with stock ownership—particularly in the very company that employs them. It is inadvisable for small-scale investors, especially workers at the outset of their financial journey, to concentrate their savings in the most volatile and high-risk form of investment.

The novice saver requires a secure investment vehicle. Beyond maintaining a modest reserve in a savings account—sufficient to cover essential contingencies such as illness, unemployment, and funerals not otherwise insured—workers should prioritise asset classes, ranked in terms of security and social utility, like household furniture and essential domestic goods, homeownership, whether in the form of an apartment or a modest house, small-scale land acquisitions, such as an orchard or a garden. In socially advanced economies such as Switzerland, England, and the United States, mortgage banks and building societies facilitate these investments by offering financing for up to 80–90% of the purchase price, with long-term repayment plans for the remainder. Despite the potential drawback of reducing the worker’s geographic mobility, such investments are strongly recommended as they foster greater saving propensity, deepen familial bonds, and promote household well-being. From a psychological perspective, these investments remain in the sight of the investor, who not only enjoys the returns, but also enjoys them directly by drawing not only economic but also moral benefits. Redirecting expenditure away from taverns, the saver will improve his health while tending his garden and will provides nutritional value above his effort transformed into an enjoyable leisure with a better taste than food from the market.

Beyond a certain point, it is neither prudent nor ethical to offer financial advice to the worker-saver, particularly in matters of equity investment. One certainly cannot, in good conscience, recommend that a worker purchase shares in their own employing firm. A company’s fortunes may fluctuate—shares acquired at a price of 100, even if preferential, may decline to 70, to 50, or even become worthless. Even if such advice is given with the best of intentions, the worker will inevitably feel deceived should losses materialise. An investment strategy that one would hesitate to suggest even to a wealthy investor—who has the advantage of diversification and can afford the risk of losing a fraction of their portfolio, offsetting losses with gains elsewhere —must never be morally proposed to a worker whose financial security may be precarious. For a worker, however, the loss of a modest sum—perhaps a thousand lire—could provoke deep discouragement and huge suffering. It follows that an investment which an impartial financial advisor has a moral obligation not to give to the individual cannot be a means of solving an important problem for the community. A different assessment may apply where share purchases serve as a mechanism for the transfer of ownership and management from employers to workers. Such cases are exemplified by cooperative models already described above such as Maison Leclaire, Le Bon Marché, Les Samaritains of Paris, and the Familistère de Guise. In these instances, the entrepreneur seeks to donate ownership to employees while deliberately avoiding the appearance of a mere gift—a practice that, rather than fostering gratitude, often breeds resentment among recipients who may perceive the transfer as insufficient, both in absolute terms and relative to their colleagues. To circumvent these pitfalls, industrialists like Godin of the Familistère de Guise devised mechanisms whereby the employer gradually reimburses himself through the share of profits to which he is contractually entitled. A substantial portion of the company is placed under the stewardship of an autonomous body, established explicitly to safeguard the interests of employees. Workers, in turn, acquire their equity stakes veiled under the disguise of profit shares owed to them. Unlike conventional shareholders, these worker-owners acquire shares or stocks because their investment is directly tied to their continued employment and contribution to the firm, and all employees are afforded the opportunity—under defined conditions—to become shareholders themselves. The success of such experiments appears to hinge largely on the rigorous conditions governing entry into and exit from the partnership (on which, see paragraphs 80 and 81 below).

78. Payment to the Employee Community

In most instances, when profit-sharing is implemented rationally—that is, in proportion to the contribution of labour to the generation of income—a recurring observation emerges: the share allocated to each individual worker is often so modest that it appears almost insignificant in comparison to their regular wages. It amounts to little more than a token bonus, frequently falling short of the double-monthly or double-weekly payments that have become customary in many countries through collective bargaining agreements. Such situations risk yielding results reminiscent of the old Latin adage: Parturiunt montes, nascitur ridiculus mus—the mountains labour, only to bring forth a ridiculous mouse. In light of this, some employers have concluded that distributing profits in tiny individual portions serves only to create disappointment. They have instead sought alternative approaches that avoid fragmenting the sum allotted to labour into imperceptible individual shares, directing it instead towards collective benefits that yield tangible improvements for the workforce as a whole. For instance, while an individual worker receiving an extra 100 lire may experience no meaningful improvement in their financial position, multiplying that same sum by ten thousand or even one hundred thousand employees generates substantial resources—100,000 lire or even a million—which can be allocated towards shared benefits of genuine significance.

The Dollfus-Mieg et Cie. major textile company in Mulhouse, Alsace, provides a striking example of this approach. It has channelled its profit-sharing funds into maternity wards, nursery schools, primary education, ancillary education services, sanatoriums, and affordable housing for workers and their families. Additionally, the company encourages insurance schemes and voluntary savings, supplementing employees’ personal contributions with matching funds that amplify the effects of individual financial prudence, thereby fostering a culture of thrift and self-reliance. It is highly probable that, in many cases—perhaps even the majority—the collective application of profit shares produces greater benefits than individual disbursements. These two approaches can often be pursued simultaneously.

The Cognacq family, who, in the process of transferring ownership of the Grands Magasins de la Samaritaine in Paris to its employees, set aside 18,000 shares within a Cognacq Foundation. This foundation was established to fund maternity hospitals, general hospitals, nursery schools, retirement homes, and affordable housing to the benefit of the company’s workforce and their families.

79. Fund Management

When profit shares are not paid directly in cash to employees, the question of how these funds should be managed inevitably arises. One possible approach is for the company itself to retain control over these sums, administering them according to its own strategies. However, if the company experiences financial difficulties, the funds owed to workers may be treated as unsecured credit, making employees simple creditors like many others in the event of bankruptcy to be repaid in line with the general settlement of liabilities among other creditors. It is preferable to entrust fund management to an autonomously constituted fund or institution whose financial standing is entirely separate from that of the company, regardless of the company’s fortunes. Furthermore, the administration of such a fund should include representatives of the workforce. To avoid the liabilities associated with managing a separate fund, some enterprise opt to transfer workers’ profit shares directly into public pension schemes or social security funds already designed to provide long-term financial security closely aligned with those of the company’s.