12
SIMONDE DE SISMONDI (1773–1842)
Capitalism’s conscience
For a long time capitalism did not live up to its promise. Historians generally agree that the industrial revolution got going around 1760. England was the first place to feel its touch. Factories sprouted up; railways were constructed; England exported its manufactured goods all over the world. Yet few people saw much benefit. Early capitalism was absolutely brutal. Most people lived in squalor in crowded, dirty cities. Real wages barely grew in the half-century after 1760. Working hours rose sharply.
Many people at the time worried about the state of the country. Newspaper editorials spoke of “some hidden rottenness in our system”. Jean-Jacques Rousseau offered a gloomy assessment of the country that was industrialising more quickly than anywhere else. “I will grant you that the English people is richer than the others; but it does not follow that a citizen of London lives more comfortably than a citizen of Paris.” England was wealthy but the poor were abundant all the same.
Jean-Charles Léonard de Sismondi (also known as Simonde de Sismondi) puzzled about the state of England too. Yes, its GDP was rising, but in the process was the country sacrificing something else? He came to the conclusion that capitalism itself was fundamentally flawed. It robbed people of dignity and a sense of control. And the system was always on the cusp of crisis.
The best things in life aren’t things
Today, Sismondi is virtually unknown,1 but his ideas had a big influence on Karl Marx. The great French historians Charles Gide and Charles Rist remarked that “it is a striking fact that most of the important social ideas in the nineteenth century can be traced back to Sismondi’s writings”, rather than Marx’s. Gareth Stedman Jones argues that “[m]uch of what Sismondi wrote became part of the standard repertoire of socialist criticism of modern industry.” Many of his ideas are not totally thought through, yet they deserve to be taken more seriously. Especially today.
Born in Geneva in 1773, Sismondi was raised in a prosperous family.2 He married into a family that made him a close relative of Josiah Wedgwood, the famous potter. He was well travelled. In the 1790s he embarked with his family on a trip to England where he stayed in an inn on Jermyn Street and moved in high society. That trip turned him into a lifelong Anglophile.
His first writings were on politics. For a long while he was an advocate of radical, participatory democracy. The modern history of Geneva had been one with lots of popular uprisings, which had aimed to improve the rights of the lower orders. As a keen youngster in 1782, Sismondi witnessed one such insurrection, which was brutally crushed by the ruling elite. However, following his return from England in 1794, Sismondi soon became a victim of the nasty effects of uncontrolled liberty. The French Revolution reached Geneva in 1792. Six weeks after his return, Sismondi’s house was pillaged. He and his father were both arrested. Some of his friends were put to their deaths. Sismondi quickly decamped to Italy. From that point onwards Sismondi “revealed an attitude more sceptical towards political liberty than was [his] youthful idealism”, in the words of H. O. Pappe, a historian.
Sismondi’s economic thought underwent a similar evolution. His first book on economics was called Commercial Wealth (1803). The book was, in effect, a commentary on Adam Smith’s Wealth of Nations (1776). It cannot be a coincidence that the titles of the two books are so similar. Sismondi was enthusiastic about the boundless potential of free trade. “After for a long time having regarded the commercial trades with a haughty disdain,” he argued, “governments finally had to come to the conclusion, that they formed one of the most formidable sources of national wealth.”
Yet from 1803 onwards Sismondi took a radical turn. He came to believe that the capitalism put forward by Smith and his followers had big flaws. He could not help but think that mainstream political economists, especially David Ricardo, ignored real people. Sismondi’s critique of capitalism is encapsulated in New Principles of Political Economy, which was published in 1819. The title of the book was surely a sassy play on Ricardo’s Principles of Political Economy, which had been published two years before. The second edition of Sismondi’s New Principles, which was published in 1827, was even more strident in its critique of capitalism.
An outsider looking in
What led to Sismondi’s radicalisation? His training as a historian may have something to do with it. As a young man, Sismondi had annotated a copy of Edward Gibbon’s Decline and Fall of the Roman Empire, a landmark history book published in 1776.
He gradually applied his historical insights to the study of the economy. He had a thought at the back of his mind the whole time: “Things have not always been like this, and things will not be like this forever.” To us, that may sound pretty banal. It would not have sounded so at the time. Most of the political economists had a rather simplistic view of history (or at least the ones who hadn’t read Hegel, whose views are sometimes suggestive of Sismondi’s). Basically, they viewed different societies as having been more or less capitalist. “When we compare the state of a nation at two different periods,” says Adam Smith, “we may be assured that its capital must have increased during the interval between the two periods.” Ricardo is the worst offender. “In different stages of society… the accumulation of capital… is more or less rapid.”3
Sismondi, by contrast, says that societies of the past might have been fundamentally different from what they are today. The conception of the self might have been different; people may have been less self-interested; material wealth might have been less of a symbol of social status. What of honour, self-sacrifice, loyalty? Adam Smith believes that it is human nature to “truck and barter”; Sismondi holds up his hands and says that he has absolutely no idea what human nature really is.
An important lesson flows from that insight. If societies were different in the past, they might be different in the future. Humans were not destined to live in poverty and misery, as many did at the time. Capitalism, Sismondi says, may not even last for all that long. This notion, unsurprisingly, was a source of great inspiration for Karl Marx.
Sismondi, in sum, found that the lesson of history was that no social system endured for all that long. Once he had established that notion to his own satisfaction, he wondered what he would like to change about capitalism. He found plenty of things, which can be grouped into two. The first concerns what he called “chrematistics”–something that he would like to get rid of. The second concerns what he saw as capitalism’s self-destructing tendencies, which he would like to treat.
There’s more to life than GDP
Take “chrematistics” first. The following quotation from Sismondi summarises the idea. It is not a definition, exactly, but gives a flavour of what Sismondi is getting at:
[Chrematistics] extols to the clouds the prosperity of a country where one man can every day load a vessel with cloths, or hardware, or earthenware, sufficient for many thousands of his fellow men; but what a strange forgetfulness of human kind never to inquire what becomes of the man which the great factory has displaced.
In archaic language, Sismondi is making an argument that you hear all the time. He basically argues that political economy is obsessed with wealth at the expense of everything else. It ignores or devalues softer, difficult-to-measure outcomes, such as human happiness. In his view economists had got the thinking back-to-front. “For Sismondi,” argues Ross Stewart, “the object of political economy and economics [should be] man and not wealth.”
The obsession with wealth accumulation leads to a number of unfortunate consequences, in Sismondi’s opinion. His description of England is particularly telling. “In this astonishing country, which seems to be submitted to a great experiment for the instruction of the rest of the world, I have seen production increasing whilst enjoyments were diminishing.” With the benefit of hindsight, this is no wishy-washy argument. Evidence from John Komlos, a historian, suggests that from 1730 to 1850, while British GDP was growing quickly, the average height of British men fell by about 3cm, implying poorer nutrition. In the early part of the industrial revolution life expectancies fell in many places, especially cities, to as low as the early twenties. “Sismondi, to his eternal credit,” argued Rosa Luxemburg, whom we meet later in this book, “had confronted the classical school of harmony with the sinister aspects of capitalism.”
As Gareth Stedman Jones points out, Sismondi also has a philosophical objection to the rise of capitalism. He believes that the system deprives people of a feeling of being in control of their lives. Once property was held collectively. Now it is held privately, with one person telling another what to do. Once people lived in the countryside at one with nature. Now they live in dark, dirty cities. As people come to feel a sense of worthlessness and lack of control, self-destructive behaviour is inevitable. There is no stronger position against the “doux commerce” notion promoted by Smith, which holds that the development of commercial society will “improve” humankind.
You will get a deeper understanding of Sismondi’s argument with the following example. He appeared, like Thomas Malthus, to worry that the working classes would have too many children and thus cause their living standards to fall. But unlike Malthus, who blamed the working classes for their predicament, Sismondi blamed capitalism. In traditional societies people did not marry until later, Sismondi asserts. In guild society, for instance, “a workman never married till after he had been passed master”. But as Gareth Stedman Jones interprets Sismondi, capitalist England had produced a “population of day labourers” and “there was no longer a particular time in a labourer’s life at which the choice between marriage and celibacy was best made”. Since people lived increasingly precarious, difficult lives, they became less responsible citizens. They had less to live for. Sismondi basically said that if there were ever a “population problem” it would be capitalism’s fault.
There is a certain amount of romantic nostalgia to Sismondi’s theorising–the idea being that people were much happier in pre-capitalist days when they could sit around in the fields all day eating apples. The reality is not quite so jolly. Feudal England was a horribly exploitative place. Sismondi thus falls into the same trap as some of our other thinkers–not being sufficiently critical about the sort of society that came before. Friedrich Engels, in the The Condition of the Working Class in England (1845), commits much the same error. Still, was Sismondi wrong to highlight the sense of dislocation and precariousness that accompanied the rise of capitalism?
Sismondi was not done yet. His critique of chrematistics leads into the second plank of his economic argument. Thinkers such as Smith strongly believed in the beneficial economic effects of the division of labour and improved technology, even as they recognised that there were some social costs (see Chapter 7). Sismondi, on the other hand, came to condemn also the economic consequences of the division of labour and the free market.
Walk along a tightrope
The second strand of Sismondi’s critique of capitalism concerns economic crises. For mainstream political economists such as David Ricardo, crises occurred because of some external event–perhaps a war or a drought. In the 1810s Britain’s recessions could be explained as the fault of freak events, including wars. At the end of these wars in 1815, war production ceased and thousands of men returned from the fighting, searching for jobs. An increase in unemployment and lower wages, entirely predictably, followed. But you could hardly blame capitalism for what had taken place.
Sismondi rejects the notion that external events cause economic crises under capitalism. Instead he argues that economic crises occur because of factors internal to capitalism. The concepts of “overproduction” and “underconsumption”, which had also animated many of the mercantilists, are important here. Sismondi argues that at any given time capitalists will produce as much as is feasible in order to maximise their profits. Nothing wrong with that: from the perspective of the individual business, that is the rational thing to do. But under conditions laid down by capitalism, production leads to overproduction, in Sismondi’s view.
How does this happen? Capitalism, according to Sismondi, causes inequality to rise as capitalists acquire more power over workers. Capitalists prefer to use machinery instead of human labour. That means that they can cut costs–sensible, from a business perspective–but it also increases unemployment. As joblessness rises, working-class wages decline. All the while, capitalists make juicy profits.
But only for a while. If the working classes have little purchasing power then where can the capitalists sell their goods? Exporting them is one option. But according to Sismondi eventually they will end up producing too much. The purchasing power of the working class is not sufficient to “soak up” everything that is produced. In time that produces a “general glut”, leading to unemployment and slow economic growth. Vladimir Lenin credited Sismondi with having “indicate[d] the contradictions of capitalism”. It also sounds rather similar to Rosa Luxemburg’s theory of capitalism, as we shall see in Chapter 19. But unlike Marxists and Marx himself, Sismondi does not think that there will eventually be a crisis to end all crises, which ushers in communism. Instead he believed that capitalism would simply become trapped in a combination of weak growth and/or recession.
Jean-Baptiste Say had pre-emptively attacked some of these arguments. He suggested that so-called “underconsumption” was impossible. Yes, the market could produce too many of one particular good, such as shoes, but generalised overproduction could not happen. Sismondi disagreed with Say’s law–vehemently.
Were Sismondi’s theories ever vindicated? As far as the data are concerned, some of what Sismondi argued has been proven right. From 1759 to 1801 the Gini coefficient of England and Wales, a widely used measure of inequality, rose from about 0.45 to 0.52. Capitalists’ profits did indeed increase during the early part of the industrial revolution, even as workers’ wage growth stagnated. Sismondi’s strident argument even unsettled Ricardo, one of his great intellectual adversaries. In the third edition of Ricardo’s Principles, which was published in 1821, the author noted that “the opinion entertained by the labouring classes, that the employment of machinery is frequently detrimental to their interests, is not founded on prejudice and error”.
Nothing in extremis
Sismondi proposes a number of solutions to the problems he has identified. Unlike Marx, who was influenced by Sismondi’s ideas, he does not recommend or predict the overthrow of capitalism. Instead he is a liberal (in the English sense): he believes in reformist public policy. His characterisation of the state seems rather modern: “protector of the weak against the strong, the defender of him who cannot defend himself”. Sismondi’s liberal outlook infuriated his more radical readers. Lenin, for instance, did not like him, accusing him of “confin[ing] himself to a sentimental criticism of capitalism from the viewpoint of the petty bourgeois”.
One of Sismondi’s solutions was to broaden property ownership, which would allow ordinary people to exert more control over their lives. He appears to favour cooperatives. According to John Henry, Sismondi “promoted a non-capitalist, petty-production (or peasant-based) economy as (vastly) superior to that of mature capitalism, particularly in that (he believed) such an economic organisation would generate equality rather than inequality… and a better moral character”. In that sense, he goes further than people he influenced, who argued merely for a bit more redistribution. Sismondi’s arguments sound more like those of John Stuart Mill, who was later to argue in favour of broadening property ownership among the working classes.
Sismondi also wants the state to play a more active role in the economy. He uses the metaphor of a household to inform his argument. The thinking goes that in a household, there is usually one person who is in charge. That person will help others who are struggling. As he puts it, “Perhaps the task of government should be to moderate these movements, in order to equalise them (to maintain the proper proportions among investment, production, wages, profits, and aggregate consumption).” That sounds very Keynesian. The simplest version of Keynesian theory has it that the government should “fine-tune” the economy–cutting spending during periods of economic boom and boosting spending during slumps. It is little wonder that Keynes himself was a fan of Sismondi.
Sismondi also sees a role for the state in improving social welfare. He suggested things that to early 19th-century ears would have sounded fairly radical, such as a minimum wage and regulations on working hours. Like Adam Smith, Sismondi recommends the expansion of education for the working classes. But Sismondi even appears in favour of a “universal basic income”–an annual unconditional payment made to all citizens. No matter all this government interference might lead to some loss of economic efficiency: in his view, people’s lives end up better.
Fashions change
Many of Sismondi’s contemporaries believed he was talking nonsense. For about a century after the 1850s, he was forgotten. The notion took hold that a free-trading, laissez-faire economic system was the pinnacle of what mankind could achieve. All else that came before was irrational. But one of the strengths of Sismondi’s economics is that it is historically informed. As rose-tinted as his historical lens may be, he at least recognises that there are different ways of organising society. He believed that a different sort of state, one that moved towards liberal interventionism, was possible. As it turns out, he was right.