C H A P T E R T E N
Political Economy and
the Discovery of Society
When the significance of poverty was realized, the stage was set for the nineteenth century. The watershed lay somewhere around 1780. In Adam Smith’s great work poor relief was no problem as yet; only a decade later it was raised as a broad issue in Townsend’s Dissertation on the Poor Laws and never ceased to occupy men’s minds for another century and a half.
The change of atmosphere from Adam Smith to Townsend was, indeed, striking. The former marked the close of an age which opened with the inventors of the state, Thomas More and Machiavelli, Luther and Calvin; the latter belonged to that nineteenth century in which Ricardo and Hegel discovered from opposite angles the existence of a society that was not subject to the laws of the state, but, on the contrary, subjected the state to its own laws. Adam Smith, it was true, treated material wealth as a separate field of study; to have done so with a great sense of realism made him the founder of a new science, economics. For all that, wealth was to him merely an aspect of the life of the community, to the purposes of which it remained subordinate; it was an appurtenance of the nations struggling for survival in history and could not be dissociated from them. In his view, one set of conditions which governed the wealth of nations derived from the improving, stationary, or declining state of the country as a whole; another set derived from the paramountcy of safety and security as well as the needs of the balance of power; still another was given by the policy of the government as it favored town or countryside, industry or agriculture; hence it was only within a given political framework that he deemed it possible to formulate the question of wealth, by which he for one meant the material welfare of “the great body of the people.” There is no intimation in his work that the economic interests of the capitalists laid down the law to society; no intimation that they were the secular spokesmen of the divine providence which governed the economic world as a separate entity. The economic sphere, with him, is not yet subject to laws of its own that provide us with a standard of good and evil.
Smith wished to regard the wealth of the nations as a function of their national life, physical and moral; that is why his naval policy fitted in so well with Cromwell’s Navigation Laws and his notions of human society harmonized with John Locke’s system of natural rights. In his view nothing indicates the presence of an economic sphere in society that might become the source of moral law and political obligation. Self-interest merely prompts us to do what, intrinsically, will also benefit others, as the butcher’s self-interest will ultimately supply us with a dinner. A broad optimism pervades Smith’s thinking since the laws governing the economic part of the universe are consonant with man’s destiny as are those that govern the rest. No hidden hand tries to impose upon us the rites of cannibalism in the name of self-interest. The dignity of man is that of a moral being, who is, as such, a member of the civic order of family, state, and “the great Society of mankind.” Reason and humanity set a limit to piecework; emulation and gain must give way to them. Natural is that which is in accordance with the principles embodied in the mind of man; and the natural order is that which is in accordance with those principles. Nature in the physical sense was consciously excluded by Smith from the problem of wealth. “Whatever be the soil, climate or extent of territory of any particular nation, the abundance or scantiness of its annual supply, must, in that particular situation, depend upon two circumstances,” namely, the skill of labor and the proportion between the useful and the idle members in society. Not the natural, but only the human factors enter. This exclusion of the biological and geographical factor in the very beginning of his book was deliberate. The fallacies of the Physiocrats served him as a warning; their predilection for agriculture tempted them to confuse physical nature with man’s nature, and induced them to argue that the soil alone was truly creative. Nothing was further from the mind of Smith than such a glorification of Physis. Political economy should be a human science; it should deal with that which was natural to man, not to Nature.
Townsend’s Dissertation, ten years afterward, centered on the theorem of the goats and the dogs. The scene is Robinson Crusoe’s island in the Pacific Ocean, off the coast of Chile. On this island Juan Fernandez landed a few goats to provide meat in case of future visits. The goats had multiplied at a biblical rate and became a convenient store of food for the privateers, mostly English, who were molesting Spanish trade. In order to destroy them, the Spanish authorities landed a dog and a bitch, which also, in the course of time, greatly multiplied, and diminished the number of goats on which they fed. “Then a new kind of balance was restored,” wrote Townsend. “The weakest of both species were among the first to pay the debt of nature; the most active and vigorous preserved their lives.” To which he added: “It is the quantity of food which regulates the number of the human species.”
We note that a search* in the sources failed to authenticate the story. Juan Fernandez duly landed the goats; but the legendary dogs were described by William Funnell as beautiful cats, and neither dogs nor cats are known to have multiplied; also the goats were inhabiting inaccessible rocks, while the beaches—on this all reports agree—were teeming with fat seals which would have been a much more engaging prey for the wild dogs. However, the paradigm is not dependent upon empirical support. Lack of antiquarian authenticity can detract nothing from the fact that Malthus and Darwin owed their inspiration to this source—Malthus learned of it from Condorcet, Darwin from Malthus. Yet neither Darwin’s theory of natural selection, nor Malthus’s population laws might have exerted any appreciable influence on modern society but for the following maxims which Townsend deduced from his goats and dogs and wished to have applied to the reform of the Poor Law: “Hunger will tame the fiercest animals, it will teach decency and civility, obedience and subjection, to the most perverse. In general it is only hunger which can spur and goad them [the poor] on to labour; yet our laws have said they shall never hunger. The laws, it must be confessed, have likewise said, they shall be compelled to work. But then legal constraint is attended with much trouble, violence and noise; creates ill will, and never can be productive of good and acceptable service: whereas hunger is not only peaceable, silent, unremitting pressure, but, as the most natural motive to industry and labour, it calls forth the most powerful exertions; and, when satisfied by the free bounty of another, lays lasting and sure foundations for goodwill and gratitude. The slave must be compelled to work but the free man should be left to his own judgment, and discretion; should be protected in the full enjoyment of his own, be it much or little; and punished when he invades his neighbour’s property.”
Here was a new starting point for political science. By approaching human community from the animal side, Townsend bypassed the supposedly unavoidable question as to the foundations of government; and in doing so introduced a new concept of law into human affairs, that of the laws of Nature. Hobbes’s geometrical bias, as well as Hume’s and Hartley’s, Quesnay’s and Helvetius’s hankering after Newtonian laws in society had been merely metaphorical: they were burning to discover a law as universal in society as gravitation was in Nature, but they thought of it as a human law—for instance, a mental force such as fear with Hobbes, association in Hartley’s psychology, self-interest with Quesnay, or the quest for utility with Helvetius. There was no squeamishness about it: Quesnay like Plato occasionally took the breeder’s view of man and Adam Smith did certainly not ignore the connection between real wages and long-run supply of labor. However, Aristotle had taught that only gods or beasts could live outside society, and man was neither. To Christian thought also the chasm between man and beast was constitutive; no excursions into the realm of physiological facts could confuse theology about the spiritual roots of the human commonwealth. If, to Hobbes, man was as wolf to man, it was because outside of society men behaved like wolves, not because there was any biological factor which men and wolves had in common. Ultimately, this was so because no human community had yet been conceived of which was not identical with law and government. But on the island of Juan Fernandez there was neither government nor law; and yet there was balance between goats and dogs. That balance was maintained by the difficulty the dogs found in devouring the goats which fled into the rocky part of the island, and the inconveniences the goats had to face when moving to safety from the dogs. No government was needed to maintain this balance; it was restored by the pangs of hunger on the one hand, the scarcity of food on the other. Hobbes had argued the need for a despot because men were like beasts; Townsend insisted that they were actually beasts and that, precisely for that reason, only a minimum of government was required. From this novel point of view, a free society could be regarded as consisting of two races: property-owners and laborers. The number of the latter was limited by the amount of food; and as long as property was safe, hunger would drive them to work. No magistrate was necessary, for hunger was a better disciplinarian than the magistrate. To appeal to him, Townsend pungently remarked, would be “an appeal from the stronger to the weaker authority.”
The new foundations closely fitted the society that was emerging. Since the middle of the eighteenth century, national markets had been developing; the price of grain was no longer local, but regional; this presupposed the almost general use of money and a wide marketability of goods. Market prices and incomes, including rents and wages, showed considerable stability. The Physiocrats were the first to note these regularities, which they could not even theoretically fit into a whole since feudal incomes were still prevalent in France, and labor was often semi-servile, so that neither rents nor wages were, as a rule, determined in the market. But the English countryside in Adam Smith’s time had become part and parcel of a commercial society; the rent due to the landlord as well as the wages of the agricultural laborer began to show a dependence on prices. Only exceptionally were wages or prices fixed by the authorities. And yet in this curious new order the old classes of society continued to exist more or less in their former hierarchy, notwithstanding the disappearance of their legal privileges and disabilities. Though no law constrained the laborer to serve the farmer, nor the farmer to keep the landlord in plenty, laborers and farmers acted as if such compulsion existed. By what law was the laborer ordained to obey a master, to whom he was bound by no legal bond? What force kept the classes of society apart as if they were different kinds of human beings? And what maintained balance and order in this human collective which neither invoked nor even tolerated the intervention of political government?
The paradigm of the goats and the dogs seemed to offer an answer. The biological nature of man appeared as the given foundation of a society that was not of a political order. Thus it came to pass that economists presently relinquished Adam Smith’s humanistic foundations, and incorporated those of Townsend. Malthus’s population law and the law of diminishing returns as handled by Ricardo made the fertility of man and soil constitutive elements of the new realm the existence of which had been uncovered. Economic society had emerged as distinct from the political state.
The circumstances under which the existence of this human aggregate—a complex society—became apparent were of the utmost importance for the history of nineteenth-century thought. Since the emerging society was no other than the market system, human society was now in danger of being shifted to foundations utterly foreign to the moral world of which the body politic hitherto had formed part. The apparently insoluble problem of pauperism was forcing Malthus and Ricardo to endorse Townsend’s lapse into naturalism.
Burke approached the issue of pauperism squarely from the angle of public security. Conditions in the West Indies convinced him of the danger of nurturing a large slave population without any adequate provision for the safety of the white masters, especially as the Negroes were often allowed to go armed. Similar considerations, he thought, applied to the increase of the number of the unemployed at home, seeing that the government had no police force at its disposal. Although an out-and-out defender of patriarchal traditions, he was a passionate adherent of economic liberalism, in which he saw also the answer to the administrative problem of pauperism. Local authorities were gladly taking advantage of the unexpected demand of the cotton mills for destitute children whose apprenticing was left to the care of the parish. Many hundreds were indentured with manufacturers, often in distant parts of the country. Altogether the new towns developed a healthy appetite for paupers; factories were even prepared to pay for the use of the poor. Adults were assigned to any employer who would take them for their keep; just as they would be billeted out in turn among the farmers of the parish, in one or another form of the roundsman system. Farming out was cheaper than the running of “jails without guilt,” as workhouses were sometimes called. From the administrative angle this meant that the “more persistent and more minutely detailed authority of the employer”* took the place of the government’s and the parish’s enforcement of work.
Clearly, a question of statesmanship was involved. Why should the poor be made a public charge and their maintenance put on the parish, if ultimately the parish discharged its obligation by farming out the able-bodied to the capitalist entrepreneurs, who were so eager to fill their mills with them that they would even spend money to obtain their services? Did this not clearly indicate that there was also a less expensive way of compelling the poor to earn their keep than the parish way? The solution lay in the abolishment of the Elizabethan legislation without replacing it by any other. No assessment of wages, no relief for the able-bodied unemployed, but no minimum wages either, nor a safeguarding of the right to live. Labor should be dealt with as that which it was, a commodity which must find its price in the market. The laws of commerce were the laws of nature and consequently the laws of God. What else was this than an appeal from the weaker magistrate to the stronger, from the justice of the peace to the all-powerful pangs of hunger? To the politician and administrator laissez-faire was simply a principle of the ensurance of law and order, at minimum cost. Let the market be given charge of the poor, and things will look after themselves.
It was precisely on this point that Bentham, the rationalist, agreed with Burke, the traditionalist. The calculus of pain and pleasure required that no avoidable pain should be inflicted. If hunger would do the job, no other penalty was needed. To the question, “What can the law do relative to subsistence?” Bentham answered, “Nothing, directly.”* Poverty was Nature surviving in society; its physical sanction was hunger. “The force of the physical sanction being sufficient, the employment of the political sanction would be superfluous.”† All that was needed was the “scientific and economical” treatment of the poor.‡ Bentham was strongly opposed to Pitt’s Poor Law Bill, which would have amounted to an enactment of Speenhamland, as it permitted both outdoor relief and aid-in-wages. Yet Bentham, unlike his pupils, was at this time no rigid economic liberal, nor was he a democrat. His Industry-Houses were a nightmare of minute utilitarian administration enforced by all the chicanery of scientific management. He maintained that there always would be a need for them as the community could not quite disinterest itself in the fate of the indigent. Bentham believed that poverty was part of plenty. “In the highest stage of social prosperity,” he said, “the great mass of the citizens will most probably possess few other resources than their daily labour, and consequently will always be near to indigence.…” Hence he recommended that “a regular contribution should be established for the wants of indigence,” though thereby “in theory want is decreased and thus industry hit,” as he regretfully added, since from the utilitarian point of view the task of the government was to increase want in order to make the physical sanction of hunger effective.*
The acceptance of near-indigency of the mass of the citizens as the price to be paid for the highest stage of prosperity was accompanied by very different human attitudes. Townsend righted his emotional balance by indulging in prejudice and sentimentalism. The improvidence of the poor was a law of nature, for servile, sordid, and ignoble work would otherwise not be done. Also what would become of the fatherland unless we could rely on the poor? “For what is it but distress and poverty which can prevail upon the lower classes of the people to encounter all the horrors which await them on the tempestuous ocean or on the field of battle?” But this display of a rugged patriotism still left room for more tender sentiments. Poor relief should, of course, be abolished outright. The Poor Laws “proceed from principles which border on absurdity, as professing to accomplish that which, in the very nature and constitution of the world, is impracticable.” But once the indigent were left to the mercy of the well-to-do, who can doubt that “the only difficulty” is to restrain the impetuosity of the latter’s benevolence? And are the sentiments of charity not far nobler than those that flow from hard-and-fast legal obligations? “Can in nature anything be more beautiful than the mild complacency of benevolence?” he cried out, contrasting it with the cold heartlessness of “a parish pay-table,” which knew not those scenes of an “artless expression of unfeigned gratitude for unexpected favours.…” “When the poor are obliged to cultivate the friendship of the rich, the rich will never want inclination to relieve the distress of the poor.…” No one who has read this touching portrayal of the intimate life of the Two Nations can doubt that, unconsciously, it was from the island of the goats and dogs that Victorian England drew its sentimental education.
Edmund Burke was a man of different stature. Where men like Townsend failed in a small way, he failed in a great way. His genius exalted brutal fact into tragedy, and invested sentimentality with the halo of mysticism. “When we affect to pity as poor those who must labour or the world cannot exist, we are trifling with the condition of mankind.” This was undoubtedly better than coarse indifference, empty lamentations, or the cant of sympathetic uplift. But the virility of this realistic attitude was impaired by the subtle complacency with which he spotlighted the scenes of aristocratic pageantry. The result was to out-Herod Herod, but to underestimate the chances of timely reform. It is a fair guess that had Burke lived, the Parliamentary Reform Bill of 1832, which put an end to the ancien régime, would have been passed only at the cost of an avoidable bloody revolution. And yet, Burke might have countered, once the masses were fated by the laws of political economy to toil in misery, what else was the idea of equality but a cruel bait to goad mankind into self-destruction?
Bentham possessed neither the sleek complacency of a Townsend nor the all too precipitate historicism of a Burke. Rather, to this believer in reason and reform the newly discovered realm of social law appeared as the coveted no man’s land of utilitarian experimentation. Like Burke, he refused to defer to zoological determinism, and he too rejected the ascendency of economics over politics proper. Though author of the Essay on Usury, and of a Manual of Political Economy, he was an amateur at that science and even failed to provide the one great contribution which utilitarianism might have been expected to make to economics, namely, the discovery that value derived from utility. Instead, he was induced by associationist psychology to give rein to his boundless imaginative faculties as a social engineer. Laissez-faire meant to Bentham only another device in social mechanics. Social not technical invention was the intellectual mainspring of the Industrial Revolution. The decisive contribution of the natural sciences to engineering was not made until a full century later, when the Industrial Revolution was long over. To the practical bridge or canal builder, the designer of machines or engines, knowledge of the general laws of nature was utterly useless before the new applied sciences in mechanics and chemistry were developed. Telford, founder and lifelong president of the Institution of Civil Engineers, refused membership in that body to applicants who had studied physics and, according to Sir David Brewster, never made himself acquainted with the elements of geometry. The triumphs of natural science had been theoretical in the true sense, and could not compare in practical importance with those of the social sciences of the day. It was to these latter that the prestige of science as against routine and tradition was due, and unbelievable though it may seem to our generation, the standing of natural science greatly gained by its connection with the humane sciences. The discovery of economics was an astounding revelation which hastened greatly the transformation of society and the establishment of a market system, while the decisive machines had been the inventions of uneducated artisans some of whom could hardly read or write. It was thus both just and appropriate that not the natural but the social sciences should rank as the intellectual parents of the mechanical revolution which subjected the powers of nature to man.
Bentham himself was convinced that he had discovered a new social science, that of morals and legislation. It was to be founded on the principle of utility, which allowed of exact calculation with the help of associationist psychology. Science, precisely because it became effective within the circumference of human affairs, meant in eighteenth-century England invariably a practical art based on empirical knowledge. The need for such a pragmatic attitude was indeed overwhelming. As no statistics were available it was often not possible to say whether population was on the increase or decrease, what the trend of the balance of foreign trade was, or which class of the population was gaining on the other. It was frequently a mere matter of guesswork whether the wealth of the country was waxing or waning, where the poor came from, what the situation of credit, banking, or profits was. An empirical instead of a purely speculative or antiquarian approach to matters such as these was what was in the first place meant by “science”; and as practical interests were naturally paramount, it fell to science to suggest how to regulate and organize the vast realm of the new phenomena. We have seen how puzzled the Saints were by the nature of poverty, and how ingeniously they experimented with the forms of self-help; how the notion of profits was hailed as a cure-all for the most diverse ills; how none could say whether pauperism was a good or a bad sign; how bewildered scientific workhouse managements were to find themselves unable to make money out of the poor; how Owen made his fortune by running his factories on the lines of a conscious philanthropy; and how a number of other experiments which seemed to involve the same technique of enlightened self-help failed pitifully, thus causing dire perplexity to their philanthropic authors. Had we extended our purview from pauperism to credit, specie, monopolies, savings, insurance, investing, public finance or, for that matter, prisons, education, and lotteries we might have easily adduced as many new types of ventures in respect to each of them.
With Bentham’s death, approximately, this period comes to an end*; since the 1840s projectors in business were simply promoters of definite ventures, not any more the alleged discoverers of new applications of the universal principles of mutuality, trust, risk, and other elements of human enterprise. Henceforth businessmen imagined they knew what forms their activities should take; they rarely inquired into the nature of money before founding a bank. Social engineers were now usually found only amongst cranks or frauds, and then often confined behind iron bars. The spate of industrial and banking systems which from Paterson and John Law to the Pereires had flooded stock exchanges with the projects of religious, social, and academic sectarians had now become a mere trickle. With those engaged in the routine of business, analytical ideas were at a discount. The exploration of society, at least so it was thought, was concluded; no white spots were left on the human map. A man of Bentham’s stamp had become impossible for a century. Once the market organization of industrial life had become dominant, all other institutional fields were subordinated to this pattern; the genius for social artifacts was homeless.
Bentham’s Panopticon was not only a “mill to grind rogues honest, and idle men industrious”‡; it would also pay dividends like the Bank of England. He sponsored proposals as different as an improved system for patents; limited liability companies; a decennial census of population; the establishment of a Ministry of Health; interest-bearing notes to make savings general; a frigidarium for vegetables and fruit; armament factories on new technical principles, eventually run by convict labor, or alternatively, by the assisted poor; a Chrestomathic Day School to teach utilitarianism to the upper middle classes; a general register of real property; a system of public account keeping; reforms of public instruction; uniform registration; freedom from usury; the relinquishment of colonies; the use of contraceptives to keep the poor rate down; the junction of the Atlantic and the Pacific by means of a joint stock company; and others. Some of these projects harbored literally shoals of minor improvements as, for instance, that on Industry-Houses which were a congeries of innovations for the betterment and the exploitation of man based on the achievements of associationist psychology. While Townsend and Burke linked laissezfaire with legislative quietism, Bentham saw in it no obstacle to broadsides of reform.
Before we proceed to the answer which Malthus, in 1798, gave to Godwin and with which classical economics properly begins, let us remember the times. Godwin’s Political Justice was written to counter Burke’s Reflections on the French Revolution (1790). It appeared just before the wave of repression started with the suspension of habeas corpus (1794) and the persecution of the democratic Correspondence Societies. By this time England was at war with France and the terreur made the word “democracy” synonymous with social revolution. Yet the democratic movement in England, which was inaugurated with Dr. Price’s “Old Jewry” sermon (1789) and reached its literary height in Paine’s The Rights of Man (1791), was restricted to the political field; the discontent of the laboring poor found no echo in it; the question of the Poor Law was barely mentioned in the pamphlets which raised the cry for universal suffrage and annual parliaments. Yet actually, it was in the sphere of the Poor Law that the squires’ decisive countermove came, in the form of Speenhamland. The parish retired behind an artificial morass under the cover of which it outlived Waterloo by twenty years. But while the evil consequences of the panicky acts of political repression of the 1790s might have been soon overcome, had they stood alone, the degenerative process started by Speenhamland left its indelible mark on the country. The forty years’ prolongation of squirearchy which it produced was bought at the price of the sacrifice of the virility of the common people. “When the owning classes complained of the poor rate becoming heavier and heavier,” says Mantoux, “they overlooked the fact that it really amounted to an insurance against revolution, while the working class, when they accepted the scanty allowance doled out to them, did not realize that it was partly obtained by a reduction of their own legitimate earnings. For the inevitable result of ‘allowances’ was to keep wages down to the lowest level, and even to force them below the limit corresponding to the irreducible needs of the wage-earners. The farmer or the manufacturer relied on the parish to make up the difference between the sum he paid the men and the sum on which the men could live. For why should they incur an expense which could so easily be foisted on to the body of the ratepayers? On the other hand, those in receipt of the parish relief were willing to work for a lower wage, and thus made competition quite impossible to those who received no parish help. The paradoxical result arrived at was that the so-called ‘poor-rate’ meant an economy for the employers, and a loss for the industrious workman who expected nothing from public charity. Thus the pitiless interplay of interests had turned a charitable law into a bond of iron.”*
It was this bond, we submit, on which the new law of wages and of population rested. Malthus himself, like Burke and Bentham, was violently opposed to Speenhamland and advocated complete repeal of the Poor Law. Neither of them had foreseen that Speenhamland would force the wages of the laborer down to subsistence level and below; on the contrary, they expected that it would force wages up, or at least maintain them artificially, which, but for the Anti-Combination Laws, might well have been the case. This false anticipation helps to explain why the low level of rural wages was not traced by them to Speenhamland, which was its actual cause, but was regarded as incontrovertible proof of the working of the so-called iron law of wages. To this foundation of the new economic science we must now turn.
Townsend’s naturalism was doubtless not the only possible basis for the new science of political economy. The existence of an economic society was manifest in the regularities of prices, and the stability of the incomes dependent upon those prices; consequently, economic law may well have been based directly on prices. What induced orthodox economics to seek its foundations in naturalism was the otherwise inexplicable misery of the great mass of the producers which as we know today, could never have been deduced from the laws of the market. But the facts as they appeared to contemporaries were roughly these: in times past the laboring people had habitually lived on the brink of indigence (at least, if one accounted for changing levels of customary standards); since the coming of the machine they had certainly never risen above subsistence level; and now that the economic society was finally taking shape, it was an indubitable fact that decade after decade the material level of existence of the laboring poor was not improving a jot, if, indeed, it was not becoming worse.
If ever the overwhelming evidence of the facts seemed to point in one direction, it was, therefore, in the case of the iron law of wages, which asserted that the bare subsistence level on which laborers actually lived was the result of a law which tended to keep their wages so low that no other standard was possible for them. This semblance was, of course, not only misleading but indeed implied an absurdity from the point of view of any consistent theory of prices and incomes under capitalism. Yet, in the last analysis, it was on account of this false appearance that the law of wages could not be based on any rational rule of human behavior, but had to be deduced from the naturalistic facts of the fertility of man and soil, as they were presented to the world by Malthus’s law of population combined with the law of diminishing returns. The naturalistic element in the foundations of orthodox economics was the outcome of conditions primarily created by Speenhamland.
It follows that neither Ricardo nor Malthus understood the working of the capitalist system. Not until a century after the publication of the Wealth of Nations was it clearly realized that under a market system the factors of production shared in the product, and as produce increased, their absolute share was bound to rise.* Although Adam Smith had followed Locke’s false start on the labor origins of value, his sense of realism saved him from being consistent. Hence he had confused views on the elements of price, while justly insisting that no society can flourish, the members of which, in their great majority, are poor and miserable. However, what appears as a truism to us was a paradox in his time. Smith’s own view was that universal plenty could not help percolating down to the people; it was impossible that society should get wealthier and wealthier and the people poorer and poorer. Unfortunately, the facts did not seem to bear him out for a long time to come; and as theorists had to account for the facts, Ricardo proceeded to argue that the more society advanced the greater would be the difficulty of procuring food and the richer would landlords grow, exploiting both capitalists and workers; that the capitalists’ and the workers’ interests were in fatal opposition to one another, but that this opposition was ultimately ineffective as the workers’ wages could never rise above the subsistence level and profits were bound to shrivel up in any case. In some remote sense all these assertions contained an element of truth, but as an explanation of capitalism nothing more unreal and abstruse could have been produced. However, the facts themselves were formed on contradictory patterns and even today we find it difficult to unravel them. No wonder that the deus ex machina of animal and plant propagation had to be invoked in a scientific system the authors of which claimed to deduce the laws of production and distribution from the behavior not of plants or of animals but of men.
Let us briefly survey the consequences of the fact that the foundations of economic theory were laid down during the Speenhamland period, which made appear as a competitive market economy what actually was capitalism without a labor market.
Firstly, the economic theory of the classical economists was essentially confused. The parallelism between wealth and value introduced the most perplexing pseudo-problems into nearly every department of Ricardian economics. The wage-fund theory, a legacy of Adam Smith, was a rich source of misunderstandings. Apart from some special theories like that of rent, taxation, and foreign trade, where deep insights were gained, the theory consisted of the hopeless attempt to arrive at categorical conclusions about loosely defined terms purporting to explain the behavior of prices, the formation of incomes, the process of production, the influence of costs on prices, the level of profits, wages, and interest, most of which remained as obscure as before.
Secondly, given the conditions under which the problem presented itself, no other result was possible. No unitary system could have explained the facts, as they did not form part of any one system, but were actually the result of the simultaneous action on the body social of two mutually exclusive systems, namely, a nascent market economy and paternalistic regulationism in the sphere of the most important factor of production, labor.
Thirdly, the solution hit upon by the classical economists had the most far-reaching consequences for the understanding of the nature of economic society. As gradually the laws governing a market economy were apprehended, these laws were put under the authority of Nature herself. The law of diminishing returns was a law of plant physiology. The Malthusian law of population reflected the relationship between the fertility of man and that of the soil. In both cases the forces in play were the forces of Nature, the animal instinct of sex and the growth of vegetation in a given soil. The principle involved was the same as that in the case of Townsend’s goats and dogs: there was a natural limit beyond which human beings could not multiply and that limit was set by the available food supply. Like Townsend, Malthus concluded that the superfluous specimens would be killed off; while the goats are killed off by the dogs, the dogs must starve for lack of food. With Malthus the repressive check consisted in the destruction of the supernumerary specimens by the brute forces of Nature. As human beings are destroyed also by other causes than starvation—such as war, pestilence, and vice—these were equated with the destructive forces of Nature. This involved, strictly, an inconsistency as it made social forces responsible for achieving the balance required by Nature, a criticism, however, to which Malthus might have answered that in absence of wars and vice—that is, in a virtuous community—as many more people would have to starve as were spared by their peaceful virtues. Essentially, economic society was founded on the grim realities of Nature; if man disobeyed the laws which ruled that society, the fell executioner would strangle the offspring of the improvident. The laws of a competitive society were put under the sanction of the jungle.
The true significance of the tormenting problem of poverty now stood revealed: economic society was subject to laws which were not human laws. The rift between Adam Smith and Townsend had broadened into a chasm; a dichotomy appeared which marked the birth of nineteenth-century consciousness. From this time onward naturalism haunted the science of man, and the reintegration of society into the human world became the persistently sought aim of the evolution of social thought. Marxian economics—in this line of argument—was an essentially unsuccessful attempt to achieve that aim, a failure due to Marx’s too close adherence to Ricardo and the traditions of liberal economics.
The classical economists themselves were far from unconscious of such a need. Malthus and Ricardo were in no way indifferent to the fate of the poor but this humane concern merely forced a false theory into even more tortuous paths. The iron law of wages carried a well-known saving clause according to which the higher the customary needs of the laboring class, the higher the subsistence level below which not even the iron law could depress wages. It was this “standard of wretchedness” on which Malthus set his hopes* and which he wished to have raised by every means, for thus alone, he thought, could those be saved from the lowest forms of wretchedness, who, by virtue of his law were doomed to be wretched. Ricardo, too, for the same reason, wished that in all countries the labouring classes should have a taste for comforts and enjoyments, “and that they should be stimulated by all legal means in their exertions to procure them.” Ironically, in order to evade the law of nature, men were here enjoined to raise their own starvation level. And yet, these were undoubtedly sincere attempts on the part of the classical economists to rescue the poor from the fate which their theories helped to prepare for them.
In the case of Ricardo, theory itself included an element which counterbalanced rigid naturalism. This element, pervading his whole system, and firmly grounded in his theory of value, was the principle of labor. He completed what Locke and Smith had begun, the humanization of economic value; what the Physiocrats had credited to Nature, Ricardo reclaimed for man. In a mistaken theorem of tremendous scope he invested labor with the sole capacity of constituting value, thereby reducing all conceivable transactions in economic society to the principle of equal exchange in a society of free men.
Within Ricardo’s system itself the naturalistic and the humanistic factors coexisted which were contending for supremacy in economic society. The dynamic of this situation was of overwhelming power. As its result the drive for a competitive market acquired the irresistible impetus of a process of Nature. For the self-regulating market was now believed to follow from the inexorable laws of Nature, and the unshackling of the market to be an ineluctable necessity. The creation of a labor market was an act of vivisection performed on the body of society by such as were steeled to their task by an assurance which only science can provide. That the Poor Law must disappear was part of this certainty. “The principle of gravitation is not more certain than the tendency of such laws to change wealth and vigour into misery and weakness … until at last all classes should be infected with the plague of universal poverty,” wrote Ricardo.* He would have been, indeed, a moral coward who, knowing this, failed to find the strength to save mankind from itself by the cruel operation of the abolishment of poor relief. It was on this point that Townsend, Malthus and Ricardo, Bentham, and Burke were at one. Fiercely as they differed in method and outlook, they agreed on the principles of political economy and opposition to Speenhamland. What made economic liberalism an irresistible force was this congruence of opinion between diametrically opposed outlooks; for what the ultra-reformer Bentham and the ultra-traditionalist Burke equally approved of automatically took on the character of self-evidence.
One man alone perceived the meaning of the ordeal, perhaps because among the leading spirits of the age he alone possessed intimate practical knowledge of industry and was also open to inner vision. No thinker ever advanced farther into the realm of industrial society than did Robert Owen. He was deeply aware of the distinction between society and state; while harboring no prejudice against the latter, as Godwin did, he looked to the state merely for that which it could perform: helpful intervention designed to avert harm from the community, emphatically not the organizing of society. In the same way he nourished no animosity against the machine the neutral character of which he recognized. Neither the political mechanism of the state, nor the technological apparatus of the machine hid from him the phenomenon: society. He rejected the animalistic approach to society, refuting its Malthusian and Ricardian limitations. But the fulcrum of his thought was his criticism of Christianity, which he accused of “individualization,” or of fixing the responsibility for character on the individual himself, thus denying, to Owen’s mind, the reality of society and its all-powerful formative influence upon character. The true meaning of the attack on “individualization” lay in his insistence on the social origin of human motives: “Individualized man, and all that is truly valuable in Christianity, are so separated as to be utterly incapable of union through all eternity.” His discovery of society urged him on to transcend Christianity and seek for a position beyond it. He grasped the truth that because society is real, man must ultimately submit to it. His socialism, one might say, was based on a reform of human consciousness to be reached through the recognition of the reality of society. “Should any of the causes of evil be irremovable by the new powers which men are about to acquire,” he wrote, “they will know that they are necessary and unavoidable evils; and childish unavailing complaints will cease to be made.”
Owen may have nourished an exaggerated notion of those powers; otherwise he hardly could have suggested to the magistrates of the County of Lanark that society should be forthwith newly started from the “nucleus of society” which he had discovered in his village communities. Such flux of the imagination is the privilege of the man of genius, but for whom mankind could not exist for lack of understanding of itself. All the more significant was the irremovable frontier of freedom to which he pointed, that was given by the necessary limits set to the absence of evil in society. But not until man had transformed society according to the ideals of justice would this frontier become apparent, Owen felt; then man would have to accept this frontier in the spirit of maturity which knows not childish complaint.
Robert Owen, in 1817, described the course on which Western man had entered and his words summed up the problem of the coming century. He pointed to the mighty consequences which proceed from manufactures, “when left to their natural progress.” “The general diffusion of manufactures throughout a country generates a new character in its inhabitants; and as this character is formed upon a principle quite unfavourable to individual or general happiness, it will produce the most lamentable and permanent evils, unless its tendency be counteracted by legislative interference and direction.” The organization of the whole of society on the principle of gain and profit must have far-reaching effects. He formulated them in terms of human character. For the most obvious effect of the new institutional system was the destruction of the traditional character of settled populations and their transmutation into a new type of people, migratory, nomadic, lacking in self-respect and discipline—crude, callous beings of whom both laborer and capitalist were an example. He proceeded to the generalization that the principle involved was unfavorable to individual and social happiness. Grave evils would be produced in this fashion unless the tendencies inherent in market institutions were checked by conscious social direction made effective through legislation. Doubtless, the condition of the laborers which he deplored was partly the effect of the “allowance system.” But essentially, what he observed was true of town and village laborers alike, namely, that “they are at present in a situation infinitely more degraded and miserable than they were before the introduction of those manufactories, upon the success of which their bare subsistence now depends.” Here again, he hit rock bottom, emphasizing not incomes but degradation and misery. And as the prime cause of this degradation he, rightly again, pointed to the dependence for bare subsistence on the factory. He grasped the fact that what appeared primarily as an economic problem was essentially a social one. In economic terms the worker was certainly exploited: he did not get in exchange that which was his due. But important though this was, it was far from all. In spite of exploitation, he might have been financially better off than before. But a principle quite unfavorable to individual and general happiness was wreaking havoc with his social environment, his neighborhood, his standing in the community, his craft; in a word, with those relationships to nature and man in which his economic existence was formerly embedded. The Industrial Revolution was causing a social dislocation of stupendous proportions, and the problem of poverty was merely the economic aspect of this event. Owen justly pronounced that unless legislative interference and direction counteracted these devastating forces, great and permanent evils would follow.
He did not, at that time, foresee that the self-protection of society for which he was calling would prove incompatible with the functioning of the economic system itself.
* Cf. Antonio de Ulloa, Wafer, William Funnell, as well as Isaac James (which also contains Captain Wood Rogers’s account on Alexander Selkirk) and the observations of Edward Cooke.
* Webb, S. and B., English Local Government, Vols. VII–IX, “Poor Law History.”
* Bentham, J. Principles of Civil Code, Ch. 4., Browning, Vol. I, p. 333.
† Bentham, J., ibid.
‡ Bentham, J., Observation on the Poor Bill, 1797.
* Bentham, J., Principles of Civil Code, p. 314.
* 1832.
‡ Stephen, Sir L., The English Utilitarians, 1900.
* Mantoux, P. L., The Industrial Revolution in the Eighteenth Century, 1928.
* Cannan, E., A Review of Economic Theory, 1930.
* Hazlitt, W., A Reply to the Essay on Population by the Rev. T. A. Malthus in a Series of Letters, 1803.
* Ricardo, D., Principles of Political Economy and Taxation, ed. Gonner, 1929, p. 86.