13
JOHN STUART MILL (1806–1873)
Arch-capitalist or socialist?
John Stuart Mill’s father was the world’s first helicopter parent. James Mill planned to produce the perfect human–rational, radical and reformist. From the day his son was born, James force-fed him knowledge. Holidays were practically banned, lest John acquire a taste for idleness.
According to Richard Reeves, who wrote the best biography of Mill, John had composed a history of Rome by the age of six. Like a bore at a parents evening, James boasted to anyone who would listen about his son’s precocity. When John had reached the ripe old age of 13, James “decided that it was time for him to be initiated into the mysteries of political economy”, as Donald Winch puts it. David Ricardo was a regular visitor to the Mill house, where he expounded to James on his theory of profits. James himself had written widely about economics. Father and son would go on long walks, where James would lecture John about economic principles. Later that day, to prove he had understood it, John would write up the lectures.
The product of James Mill’s efforts was a man with an enormous brain. Going to university was the obvious path. But both Oxford and Cambridge universities were closed to him, since he was a Nonconformist. Instead, he attended lectures at University College, London. By 1823, at the age of 17, Mill was working for the East India Company–and he stayed there until 1858, at which point the company was nationalised. He did not have the most prestigious position at the company, yet it was a lot of work. He had to produce two big volumes on the company a year. At the same time he wrote huge amounts, including his mammoth Principles of Political Economy in 1848. The book made him an instant celebrity. It was used as the standard undergraduate textbook at Oxford up until at least 1900, around about which time Marshall’s Principles of Economics replaced it. It is rare for a textbook to remain in use for over 50 years.
Many people today see John Stuart Mill as second only to Adam Smith among the great theorists of economics. Mill is often associated with the radical laissez-faire sort of capitalism, the embodiment of the cruel, dark, it’s-for-the-greater-good approach that characterised the era. Henry Adams, an American historian, referred to Mill’s “Satanic free-trade majesty”. Look at a photo of Mill. He has deep, hollow eyes, an odd hairline, a pointy nose, and is dressed stiffly.1 Is there anyone who looks more austere or less caring of the poor?
Don’t judge a book by its cover
The popular perception of Mill is not totally wide of the mark. In his early years Mill was a ruthless utilitarian. His godfather, Jeremy Bentham, was a big influence. The only legitimate goal of all social activity, in Bentham’s view, was to maximise utility–or, what amounted to pretty much the same thing, happiness. “The greatest happiness of the greatest number” was the maxim that should motivate all social action. Critics of utilitarianism had argued that this was a “pig” philosophy–only animals are motivated by the pursuit of short-term pleasure. No matter. Like Gradgrind in Charles Dickens’s Hard Times, in his adolescence Mill subscribed to the Benthamite view of humans, which saw them as machines that tried to maximise good feelings and minimise bad ones.
As a supporter of utilitarianism, Mill started from a different philosophical position to many of the economists that had come before him. It is hard to see Bernard Mandeville as a utilitarian, concerned as he was with notions such as self-denial. Adam Smith was not a utilitarian: as Samuel Fleischacker puts it, “[Smith] says explicitly, against the proto-utilitarianism of [Frances] Hutcheson and [David] Hume, that philosophers in his day have paid too much attention to the consequences of actions, and he wants to focus instead on their propriety.” Thomas Malthus was not a utilitarian either: “Malthus was of course religious, while the Utilitarians were agnostics who made the welfare of man the standard of right and wrong,” in the words of Thomas Sowell. As we saw in the discussion of Condorcet’s views on inheritance, the Frenchman was more of a believer in natural rights than in the idea of overall utility.
But the Mill who came to write On Liberty and Principles of Political Economy was not, in fact, a Benthamite utilitarian. Around the age of 20 Mill asked himself whether, if government policies could be geared in such a way as to maximise human happiness, he himself would end up happy forever. Being truthful to himself, he could not imagine that he would be. So what was the point of it all? Surely there must be more to life than mere pleasure?
Mill sank into a deep funk. To console himself he embraced the poetry of William Wordsworth, which taught him that there was more to life than utility maximisation. Efforts such as these made Mill a far more complex thinker than he is commonly given credit for. According to John Gray, a philosopher, Mill was “above all an eclectic and transitional thinker whose writings cannot be expected to yield a coherent doctrine”. That is the first important thing about Mill. He is a utilitarian, but a complex one.
Kinder, gentler capitalism
Mill was a wide-ranging thinker, and economics was in fact a rather minor part of his life. The Cambridge Companion to Mill offers only one chapter on “Mill’s political economy”, with other chapters devoted to such matters as “psychology and the moral sciences”, “induction and scientific method” and “language and logic”. He had a great interest in France, eventually dying there in 1873. He was open-minded when it came to gender relations. In his teenage years, while walking to work, he discovered a dead baby, abandoned in the street. The incident provoked him to distribute leaflets across the city advocating birth control (he was imprisoned for the night for his troubles).
As he got older his views on gender became more radical. “I consider [sex] to be as entirely irrelevant to political rights as difference in height or in the colour of the hair,” he wrote in Considerations on Representative Government (1861). In 1866, shortly after becoming the MP for Westminster, he presented a petition in favour of women’s suffrage.2 In 1869 he published an essay, The Subjection of Women, in which he argued that “the sheer fact of birth” was no grounds for giving or denying the rights of any person.
There seems little doubt that he was convinced of the rightness of these positions by Harriet Taylor Mill, his wife from 1851 to 1858. Harriet was born in 1807 (one year after John). Aged 18 she married a pharmaceuticals wholesaler, John Taylor, who had a reputation for being a nice but fairly simple man. Taylor’s reputation for niceness might be a little off the mark; he almost certainly gave Harriet syphilis, which he had acquired by sleeping with prostitutes.3
Harriet and John probably met around 1830. They hit it off immediately. Before long, says Dale Miller, John “made almost nightly visits to the Taylors’ home, visits that John Taylor would facilitate by going to his club”. The couple’s conduct, he says, was “scandalous by contemporary standards, let alone Victorian ones”. John Taylor eventually died, and the pair married.
Harriet influenced John enormously. Historians struggle to know exactly what she wrote, since so much of it was done with John. But it is generally agreed that she was a profound thinker in her own right. Late in his life, Mill was to say that he had learnt more from her than from all other writers put together. There also seems little doubt that parts of his work, especially in On Liberty, would not have appeared had Harriet not been present. It probably does seem fair to refer to “Mill”, rather than “the Mills” when describing the ideas that are conventionally ascribed to John–but only just.
The outsider economist
The Mills moved in circles where political economy was a big deal. John’s father knew Ricardo and Malthus, and John was imbued with their knowledge. (Though he and Marx were contemporaries in London for some 20 years, Mill seems not to have heard of him.) Like lots of the economists in this book, Mill tackled weighty theoretical questions. But in addition, his economic writings have more of a focus on policy. Mill is interested in bread-and-butter questions, including those on taxation, the distribution of wealth and the regulation of alcohol.
Let’s start with Mill’s theories. Like almost all his contemporaries, he was a big fan of free trade. As Richard Reeves points out in his biography of Mill, he was more than persuaded by the economic arguments. Free trade, in Mill’s view, increases productivity: “Whatever causes a greater quantity of anything to be produced in the same place, tends to the general increase of the productive powers of the world,” he wrote in Principles of Political Economy. This sounds quite similar to Smith’s argument about the benefits of free trade, which focuses on the gains that arise as a bigger market leads to greater and greater division of labour.
Mill also tackled the thorny question of value. According to Jonathan Riley, Mill took a different position to Smith, arguing that a commodity’s value depended on how useful it was, as well as how scarce it was. (In that sense Mill also diverged from Ricardo.) “Exchange value is nil”, Riley summarises Mill’s position, “if there is no effective demand for the commodity [or if] nature supplies it in such abundance that any demand for it can be satisfied without incurring any costs of production.” In addition, Mill argued that capitalists, not just workers, created value. Capitalists would need to “abstain” from consuming the money they had; as Mill puts it, “the return for abstinence is profit”. To modern readers, Mill’s account of value will probably seem fairly reasonable and intuitive.
Meanwhile, Mill adopted and extended Ricardo’s ideas on the role of rent. Recall that Ricardo had divided the economy into three main sectors: workers, capitalists and the landed gentry. Society’s income is distributed to each group, respectively, as wages, profits and rents. Ricardo’s theory had found that, over time, rent would take up a bigger and bigger share of overall economic output; landlords would get richer and richer while everyone else stayed the same (see Chapter 9).
Mill proposes something similar. The argument goes something like this. Following Malthus’s logic, Mill argues that workers can only end up being paid at subsistence level. If for whatever reason wages rise above subsistence, then workers will have more children. That increases the supply of labour, forcing wages back down. Over the long run workers cannot hope to do better than that. This means that the bare minimum wage is also the maximum wage.
Now consider what happens with the second group: owners of capital. Mill argues that for each society there is a socially acceptable profit rate, “which is barely adequate, at the given place and time, to afford an equivalent for the abstinence, risk, and exertion implied in the employment of capital”. Something similar happens with capitalists as happens with workers. There is a bare minimum rate of profit, below which capitalists will not invest. That provides a floor to the rate of profit. But if for whatever reason the rate of profit rises, then capitalists invest more, adding to the stock of capital and causing the rate of profit to fall. So just as for workers, the bare minimum profit rate is also the maximum profit rate.
But what about landowners? According to Riley, “Mill reaffirms Ricardo’s conclusion that… economic growth tends to enrich the owners of resources without improving the lot of workers or capitalists.” Land is fixed but economic growth is not. So as Thomas Piketty puts it, “[t]he law of supply and demand then implies that the price of land will rise continuously, as will the rents paid to landlords.” With more people about, food prices will rise. That is great news for owners of land. Mill’s own words provide the best summary of the argument: “The economical progress of a society constituted of landlords, capitalists, and labourers, tends to the progressive enrichment of the landlord class; while the cost of the labourer’s subsistence tends on the whole to increase, and profits to fall [to the bare minimum level, in both cases].”
Mill’s theory of rent does in some minor respects look different to Ricardo’s. Ricardo had argued that rent only arises because land is scarce and because some land is of higher quality than other land. But Mill, according to C. L. Lackman, “points out that even if all land were of equal quality, those lands nearest the markets would yield a rent equal to that advantage”.
More interestingly, Mill draws fundamentally different conclusions from his theory to those of Ricardo. Ricardo never seems to question the notion that continued economic growth is a Good Thing, despite it apparently only benefiting a small number of people. Mill, by contrast, stands back and says: hang on, what’s the point of it, then? Mill says that Britain is “on the very verge” of reaching the point at which landlords will be the only people who stand to benefit in the future.
So what should a country like Britain do? According to Riley, Mill “advocates a stationary state in which a stable population maintains itself at some reasonable average level of material comfort, yet most persons also attach more importance to certain ‘higher pursuits’ than to further labour, investment, and exploitation of natural resources”.
You heard that right: Mill wants economic growth to stop. Now, to be clear, Mill can see the benefits of some economic activity. Like Adam Smith, he thinks that markets get people to cooperate, which makes everyone nicer to each other. The real reason Mill loved free trade was not because it made the economy more efficient but because it encouraged people of different backgrounds to talk to one another. “It is hardly possible to overrate the value, for the improvement of human beings, of things which bring them into contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar.” Mill continued: “There is no nation which does not need to borrow from others.”
But there was much that Mill did not like about mid-Victorian capitalism: the “struggling to get on… the trampling, crushing, elbowing, and treading on each other’s heels”, as he eloquently put it. Mill also worried that the pressure to make money had made people dull and passive. He thought it encouraged people to focus all their attention on becoming mere accumulators of wealth. The pressure to “get on” stopped people from questioning the world and trying to make it a better place. Millians refer to this trap as the “tyranny of conformity” (though Mill himself never uses this term). Mill was a big fan of America, but he worried that that country more than any other suffered from the tyranny of conformity.4 Americans, in his view, showed “general indifference [to] those kinds of knowledge and mental culture which cannot immediately be converted into pounds, shillings and pence”.
The “higher pursuits” that he hoped would eventually replace money-grubbing could be anything. But for Mill they would probably include things like reading Pliny and learning about mathematics. He wanted people to have enough time to wander alone in nature; to think about beauty; and for flowers and shrubs to flourish. And in particular he wanted people to live lives where they challenged each other on their opinions, where no issue was ever settled. In his view, there was no higher state of living than one in which people were constantly debating. (It sounds rather exhausting.)5 That, he believed, would be easier once people were released from the feeling that they needed always to be working as hard as possible to better their economic position.
He also presumed that people would voluntarily decide to limit their numbers as they became properly enlightened. They could thus break out of the Malthusian trap, allowing their standard of living to rise–and stay high. “Mill’s Arcadia is that of the English country gentleman,” writes W. J. Ashley. “[T]he best state for human nature”, Mill concludes, “is that in which, while no one is poor, no one desires to be richer, nor has any reason to fear being thrust back by the efforts of others to push themselves forward.”
Getting your hands dirty
Mill saw one further big benefit to the arrival of the “stationary state”. It would allow people to focus their energies on the distribution of income and wealth. Mill had lots of ideas about how to allocate society’s resources more fairly. His primary concern was to boost the living standards of the working classes.
Mill wanted to increase the bargaining power of labour. He was far from hostile to trade unions which, at that time, were regarded with nothing but disdain by most of the establishment and were in any case marginal organisations (the best figures suggest that in around 1850, just 100,000 Britons were unionised). He was also in favour of the establishment of workers’ cooperatives, where ordinary people rather than distant bosses would have control over the means of production. That would ensure that workers were paid more fairly. Mill is a big fan of the peasant management of agriculture over more “rational” methods. He praises the French métayer system of sharecropping–which François Quesnay disliked intensely because it was economically inefficient (see Chapter 5).
Giving workers more bargaining power would allow them to have higher wages, which was good for them (Mill came to dismiss the idea, held by many in the classical school, that trade unions would necessarily hit workers’ wages in the long-run–the so-called “wage–fund doctrine”). Yet Mill’s advocacy of trade unions and workers’ cooperatives did not rest purely on economic grounds. In fact Mill had a political objective in mind. The thinking goes, according to Alan Ryan, that “the existing order failed to treat the workers as citizens; they were order-takers not order-givers”. In the early 1860s, only about 1.5 million Britons could vote (from a population of over 40 million). Mill, a fan of democracy, wanted this to be extended–and saw democratisation as Britain’s destiny. The situation in which capitalists bossed workers about, in Ryan’s words, was “poor training for men and women who would inevitably secure the vote in due course, and who needed to be capable… of a rational understanding of the exigencies of governing whatever enterprise they were engaged in”. Those who were given a say in the running of a company, Mill reasoned, would become more responsible voters–and better all-round citizens.
Dismantle the aristocracy
Mill also had policy prescriptions for rectifying the “problem of land” that was so central to his economics. Unlike Ricardo, he did not consider it utterly inevitable that a smaller and smaller group of landlords would get richer and richer. “I certainly do think it fair and reasonable”, Mill declared before a parliamentary committee in 1861, “that the general policy of the State should favour the diffusion rather than the concentration of wealth”. Shortly before his death in 1873 he delivered a speech in which he advocated land reform. According to Blackwood’s Magazine, it was “one of the worst exhibitions of class hatred and animosity” ever seen.
To facilitate the said “diffusion”, Mill was in favour of income taxes that fell more heavily on the rich than on the poor. But perhaps a more important policy recommendation was what can only be described as an extreme system of inheritance taxation.
It is important to appreciate the context in which Mill was making his arguments. At the time, the annual value of inheritances passed from one generation to the next was worth perhaps 20% of national income, somewhat higher than it is today. To put that into perspective, back then the total annual value of all wages, salaries and employee benefits paid each year was worth perhaps 60% of GDP. So for every £1 earned in the labour market per year, 33p was received in inheritance.
Society, therefore, was built around the idea that you needed to marry into the right family, thus assuring yourself a decent inheritance. Just read a Jane Austen novel (or Thomas Piketty’s Capital in the Twenty-First Century). Death duties in the mid-19th century were insignificant; it would have been too controversial to implement tough ones. Economists such as Condorcet, meanwhile, offered arguments against inheritance tax based on the idea of natural rights.
But Mill hated the idea that people could simply sit there, wait for a loved one to die, and then cash in. As Robert Ekelund and Douglas Walker show, Bentham heavily influenced Mill’s recommendations for inheritance tax. Bentham, who had no time for natural rights, justified heavy inheritance taxes on utilitarian grounds. He worried that people who received a large pay-out upon the death of a family member would stop working, which was a bad thing for the welfare of society as a whole. He appeared to support the idea that for those who died intestate–ie, without having specified to whom they would like their inheritance to go–the state should confiscate the whole thing. Again the argument was a utilitarian one: if someone was not expecting an inheritance when the person in question had died, their utility was not obviously diminished by not receiving it. Bentham also reckoned that higher taxes on inheritance would permit lower taxes on the poor.
In his opinions on inheritance Mill went still further than Bentham. He wanted to place actual numerical limits on what any one person could receive in inheritance–an “amount sufficient to constitute a moderate independence”, as he puts it. Ekelund and Walker argue that Mill did accept that “suppressions of an unlimited right to bequest may have a marginal negative impact on accumulation during an individual’s lifetime”. In other words, why bother to work hard if you cannot pass on very much to your children? But in Mill’s view, such limits were “more than acceptable in order to prevent the squandering of great fortunes by heirs who put no personal exertion into earning or developing them”. Strict limits on inheritance would help solve the inherent problem of capitalism identified by Mill. A small group of landed inheritors would no longer be able to enrich themselves progressively at the expense of everybody else. People who died owning large amounts of property would be forced to sell them: land would come on to the market, and could in theory be bought by anybody. While property itself might continue to attract a greater and greater share of GDP, at least that property would be more evenly distributed across the population.
Did anyone take notice of Mill’s idea of inheritance? Possibly. Death duties as a percentage of total government revenue rose over the last half of the 19th century, from 6% in 1869 (the earliest year for which there are reliable data) to 17% by 1909. According to Ekelund and Walker, the growing importance of inheritance tax indicates that “the kind of redistribution Mill envisioned was actually under way”. The Economist argues that “[r]eformers turned the early 20th century into the golden age of taxing inheritances.”
What no one knows about Mill
Let us take stock of everything Mill has recommended. Strong trade unions; an expansion of cooperatives; progressive income taxes; very harsh taxes on inheritances; a general aversion to the spiritual consequences of capitalism. Is Mill–whisper it–a socialist? Mill was familiar with the writings of the International Working Men’s Association. And he even wrote a piece of work called Chapters on Socialism, which was published after his death.
Before proceeding with that theory it is important to bear three things in mind. The first is that modern socialists would abhor Mill’s view of the working classes. In his writings on government he advocated a system called “plural voting”. People he deemed to be better qualified to exercise democratic rights would have more voting power. While someone with a university degree might get six votes, an unskilled labourer might get only one. The fact that Mill envisaged any sort of universal suffrage, of course, marked him out as a radical of sorts. In the goodness of time everybody would have the capacity to exercise their political rights equally. But Mill does not make it clear quite when that time comes. Which leads one to the inescapable view that contrary to most socialists, Mill was no egalitarian.
Second, the term “socialism” carried a different connotation to what it does today. Mill certainly does not have in mind the big-state socialism that characterised the post-war era, where bureaucrats took control of utilities such as the railways and water supply. The notion of state-provided healthcare was alien to Mill.
The third is that Mill had plenty of disagreements with other socialists. Mill “did not believe in the Marxian theory of immiseration, and disagreed with his friend Louis Blanc, the French socialist, who claimed that there was… a constant decrease in wages”, says Alan Ryan. Mill also strongly disagreed with the notion of “revolution”, which for him connoted violence. Unlike Marx, Mill absolutely did not want to abolish market relations.
How, then, to think of Mill’s socialism? It is entirely coincidental, but it is the sort of socialism that socialists today, especially in America and Britain, increasingly advocate. Socialists today have little faith in top-down intervention by a centralised state to create prosperity and equality (the best example of this is the British Labour Party’s “Alternative Models of Ownership” report, published in 2017). Instead, just like Mill, they want to ensure that workers share in the means of production–land and capital, in Mill’s schema–and have a say over economic decisions. So, for modern socialists, that means promoting cooperatives, where workers can be their own bosses. And it means putting utilities and the like into the hands of “the community” rather than the central government. Whether one agrees or not with this economic vision, the historical lineage is clear (though frequently unacknowledged). Socialist thought has gone from Mill, via a massive Marxist–Leninist detour, back to Mill again.
A slow retreat
Whatever the impact of Mill’s ideas after his death, towards the end of his life the man became more and more reclusive. Rumours flew around that he never had sex with Harriet (her syphilis was presumably an impediment). He drew mockery when he asserted that she was as responsible for his ideas as he was. The couple had largely withdrawn from society, perhaps due to the gossip surrounding their relationship. And Harriet was taken from him by respiratory failure in 1858. By the end of his life he was avoiding company altogether, dying in 1873 in France. David Stack notes that “[t]here was no large family gathered around him; no profound last words; no large funeral gathering.” He was buried next to Harriet. It was a sad ending for someone who is today regarded as one of the greatest thinkers of all time.