An Economic Critique of the Early Critics of the Industrial Revolution

Giorgio Secondi

Phillips Exeter Academy

Exeter, NH

2010 NEH Seminar for School Teachers

Historical Interpretations of the Industrial Revolution in Britain

Introduction

Contemporary historians see the Industrial Revolution in Britain as a gradual process of economic and social change rather than as an explosive event that catapulted the country into the modern era.[1] Nonetheless, the period conventionally identified with the British Industrial Revolution—1780-1830 or, more broadly, 1750-1850—continues to be recognized by historians as central. As Pat Hudson and Maxine Berg have written, it was clear to contemporary observers such as Patrick Colquhoun, Robert Owen, or Peter Gaskell, that dramatic changes were taking place under their eyes.[2] Indeed, the second half of the eighteenth century is the time when more and more of Britain’s intellectuals began to write about the economic and social changes they were observing, attempting to understand, explain, and assess what was increasingly looking like an unstoppable series of momentous events in the country’s history. Adam Smith’s The Wealth of Nations, published in London in 1776, was one of the most influential and widely read accounts of the beginning of the Industrial Revolution, and Smith’s assessment was largely enthusiastic. According to Smith, the expanding British economy, which to many contemporaries appeared as a chaotic brawl driven by greed and self-interest, was really the manifestation of a marvelous system where the pursuit of self-interest led to the best outcome for society. Specialization and division of labor allowed for efficiency gains that raised standards of living for the average Briton.[3]

This paper is about intellectuals who, unlike Smith, saw the Industrial Revolution as a turn for the worse. They perceived it as a threat to a long-established order, lamented its negative effects while dismissing the positive ones as temporary at best, and predicted an eventual return to a more traditional economic system. I will focus especially on the work of two commentators who were well known and widely read during their lifetimes: Robert Southey (1774-1843) and Thomas Carlyle (1795-1881). Both, in explaining how and why the Industrial Revolution was unraveling British society, analyzed and interpreted the changes in the economy, revealing their beliefs about how an economy works. Such beliefs betray a limited understanding of the economics behind the changes that Britain was experiencing. The goal of this paper is not to criticize these writers for being poor economists;[4] it is instead to try to understand where their beliefs came from and why specific aspects of the Industrial Revolution were especially difficult for contemporaries to comprehend. My hope is that this exercise will help shed light on the view of the world these writers held and, more broadly, on the reasons why, to this day, economic change is so often hard to understand and accept.[5]

In reviewing the writings of these commentators, I find that three economic issues seem especially arduous for the critics to understand: the effects of the increasing introduction of machines into production processes, the effects of international trade and of economic competition between countries, and the role of technological progress. I argue that the inability to conceive of a dynamic economy and the belief in the incompatibility between industrialization and Christian orthodoxy likely played the greatest role in preventing the critics from developing a more accurate understanding of the Industrial Revolution.

Machinery

None of the many economic changes that took place during the Industrial Revolution captured the contemporaries’ imagination and came to define the period more dramatically than the large-scale introduction of machines in production processes. Of course, machines had been used in production for centuries, both in agriculture and in manufacturing. The factory system, however, was largely unknown until the eighteenth century, and was pioneered by entrepreneurs such as Richard Arkwright, who built the first textile mill in Cromford in 1771[6]. The collection of hundreds of water-powered (later steam-powered) machines in one place for the purpose of production had a dramatic impact on contemporary observers. Some saw mechanization as a symbol of progress that opened a new economic era. But many worried that the nature of production had changed for the worse: whereas in the past the worker was in charge and the machine was merely a tool assisting her, in the new factories machines appeared to be in charge, stealing the limelight from the workers and relegating them to a subservient position. Thomas Carlyle, in his 1829 essay titled Signs of the Times, made his aversion to machines abundantly clear:

Our old models of exertion are all discredited and thrown aside. On every hand, the living artisan is driven from his workshop, to make room for a speedier, inanimate one. The shuttle drops from the fingers of the weaver, and falls into iron fingers that ply it faster… There is no end to machinery. Even the horse is stripped of his harness and finds a fleet fire-horse yoked in his stead. Nay, we have an artist that hatches chickens by steam; the very brood-hen is to be superseded! For all earthly, and for some unearthly purposes, we have machines and mechanic furtherances; for mincing our cabbages; for casting us into magnetic sleep. We remove mountains and make seas our smooth highway; nothing can resist us. We war with rude nature; and by our resistless engines, come off always victorious, and loaded with spoils.[7]

The negative reaction to machinery of many contemporaries has several explanations. On a basic economic level, workers often saw machines as competing for their jobs. In a 1786 petition, woolen workers in Leeds stated this view clearly: “the Scribbling Machines have thrown thousands of your petitioners out of employ, whereby they are brought into great distress, and are not able to procure a maintenance for their families…”[8] Robert Southey showed a similar concern in an essay published in 1832, writing that “machinery at length has come in competition with human labour… The multitude who have been thrown upon the public are now to be fed, means for employing them are to be devised, and the recurrence of any similar calamity is, if possible, to be prevented.”[9] The Luddite movement, which swept parts of Britain in the second decade of the nineteenth century, was one of the more radical responses by workers to the perceived threat of machines.[10]

Yet the reaction against widespread adoption of machinery, as Carlyle’s essay suggests, had deeper roots than fear of job loss. John and Barbara Hammond put it best in their 1917 book, The Town Labourer: “The men and women of Lancashire and Yorkshire felt of this new power that it was inhuman, that it disregarded all their instincts and sensibilities, that it brought into their lives an inexorable force, destroying and scattering their customs, their traditions, their freedom, their ties of family and home, their dignity and character as men and women.”[11]

While the initial impact of machinery on people’s lives was quite clear to contemporary observers, the effects of mechanization on the economy were far harder to understand. In the first half of the nineteenth century, the question of the economic effects of machinery generated a lively debate among political economists, who considered the answer essential for understanding the implications of the mechanization of production. Maxine Berg investigates this debate in her 1980 book on the “machinery question.”[12] She notes that reactions to the introduction of machinery were decidedly mixed, as the concerns of the critics clashed with the enthusiasm of both entrepreneurs and many everyday observers, who couldn’t help being excited by the technological progress that the machines embodied. Even Southey’s writings appeared to reflect an ambivalent view. His complaints about machines throwing people out of jobs were tempered by the recognition that machines had potential beneficial effects: “in its remoter consequences whatever diminishes the necessity for bodily labour will be a blessing to mankind.”[13]

Modern economists think about the machinery question differently from the critics of the eighteenth century (even though not very differently from the leading economists of the time such as Adam Smith). Workers (labor) and machines (capital) are seen as the key inputs in the production of industrial goods. Labor and capital are generally believed to work together in the production of output: weavers need looms to produce shirts, and looms need weavers to operate them in order to be useful in production. And while eighteenth-century observers of Arkwright’s textile mills may have felt that the machines were “in charge,” broadly speaking this view makes no economic sense. Workers are always in charge, in the sense that machines are only useful when operated by workers. Even today, no matter how automated a production process might be, it still needs people (workers) to design the production process, and to produce, introduce, and operate the machines. Computers may be very powerful, but unless we produce them, decide to buy them, program them, turn them on, and punch the right keys into the keyboard, they’re just inanimate and useless objects.[14]

The view that machines are always, ultimately, a tool controlled by workers, may help understand the key economic effect of the increase in the adoption of machines that took place during the Industrial Revolution. The effect is an increase in workers’ productivity (workers’ or labor productivity measures output per hour of labor). By and large, a worker with a machine can produce more output per hour than a worker without a machine; and a worker with more machines can produce more output than a worker with fewer machines. E.g., an office worker with a computer, a phone, and a fax will likely get more work done than a worker with just a phone and a fax—and a lot more work done than one with just a phone. There are obvious exceptions, and, of course, the relation between machines and productivity holds true only up to a point (a worker with ten computers isn’t much more productive than one with nine); but, again, by and large, for an economy with relatively few machines, an increase in capital (machines) translates into an increase in labor productivity. Understanding this increase in productivity is crucial to understanding the answer to the machinery question: in the long run, increases in productivity are by far the most important source of increases in standards of living.[15] Higher productivity leads to more production, more jobs, more demand, and higher incomes. In short, what economists refer to as “capital accumulation” (an increase in the number of machines used in production) raises standards of living and does not destroy jobs. But how exactly does that work?

It’s tempting to think that the increase in labor productivity generated by the introduction of machines is precisely what causes unemployment to rise. Indeed, this is clearly the view of Southey and the other critics. If a worker with a machine can produce twice as much as she could without one, the employer may choose to fire every other worker. When personal computers started becoming more common, many university administrators decided to provide each college professor with a personal computer—and soon proceeded to fire the professors’ secretaries. If one worker can get more work done with a machine, fewer workers are needed, and unemployment results. This somewhat intuitive story embodies what economists call the “lump of labor fallacy,” or the error predicated on the belief that there is a fixed amount of labor to be done. This, in turn, implies thinking that output is fixed. If an economy was restricted to producing 100 goods every year, there is no doubt that the introduction of machines would create unemployment. As each worker can produce more and more, fewer workers are needed to produce 100 goods. The important point, however, is that the economy is not restricted to producing a fixed output. To the contrary, the very reason why entrepreneurs such as Arkwright or Wedgewood introduced machines was that they were planning to produce more at a lower cost. As long as output is allowed to rise, higher productivity need not result in unemployment.

The question may arise at this point of whether the entrepreneurs who, thanks to machinery, can now produce more at a lower cost will actually be able to sell all these extra goods. Will the demand be there to snap them up? This was, indeed, another concern of contemporary observers. The critics were constantly worrying about the “glut” of goods that the Industrial Revolution was bound to cause. In an 1826 letter to statistician John Rickman, a long-time friend, Robert Southey wrote, “if some more effectual step is not put to the erection of new cotton mills, &c., than individual prudence is ever likely to afford, at some time or other the steam-engine will blow up this whole fabric of society. […] [T]hey are manufacturing more goods than the world can afford a market for, and the ebb is then as certain as the flow…”[16] Carlyle expressed a similar concern in his 1843 book Past and Present, dedicating an entire chapter to “over-production.” He wrote:

But what will reflective readers say of a Governing Class, such as ours, addressing its Workers with an indictment of ‘Over-production!’ Over-production: runs it not so? ‘Ye miscellaneous, ignoble manufacturing individuals, ye have produced too much! […] He that seeks your indictment, let him look around. Millions of shirts, and empty pairs of breeches, hang there in judgment against you. We accuse you of over-producing: you are criminally guilty of producing shirts, breeches, hats, shoes and commodities, in a frightful over-abundance. And now there is a glut, and your operatives cannot be fed!’[17]

It is, of course, entirely possible for any producer to overestimate current demand and produce too much of a good. But we don’t need to worry about an entire economy becoming “too productive” and running against the problem of lack of demand. One way to think about why this is the case is to realize that when workers become more productive, the production of each good becomes cheaper. The entrepreneur is still paying the worker for one hour of labor, but he’s getting more goods from that hour of labor. Of course, this is the very reason why the entrepreneur was eager to introduce machines and raise labor productivity—cheaper production gives him an advantage over competitors. And if there is competition, as there certainly was during the Industrial Revolution, lower costs of production will lead to lower prices for the finished products. In turn, lower prices will spur higher demand, reassuring the entrepreneur that he can produce more and sell more. In fact, the entrepreneur will not only be able to sell the extra output, but will have an incentive to hire more workers and expand output further. The reason is that workers are now more productive, which means that they’re better workers; yet, they still cost the same to employ.

When we look at what actually happened—in England or just about in any other country that industrialized—we find that the effects of the introduction of machinery were as described above, even though this was not immediately obvious to contemporary observers. By the middle of the nineteenth century the British economy produced a lot more than a century earlier and employed a lot more workers; the average worker was able to both produce and earn more.[18] The introduction of machinery was not the only factor responsible for the rise in standards of living, but the other factors (to be discussed below) operated in a similar way, i.e., they contributed to increasing the productivity of workers.

The economic answer to the machinery question may seem oversimplified—and, indeed, the version I told is, even though the essence of the argument remains true and is supported by substantial empirical evidence. The two main qualifications are that the many positive effects of machinery (1) take time to manifest themselves and (2) benefit the average worker but not necessarily all workers. Over short periods of time, it’s entirely possible to observe workers being fired as machines are introduced (as was the case for the secretaries losing their jobs when professors were given computers). Similarly, jobs for workers with specific skills may disappear because of the introduction of machines (if you were skilled at driving a horse-cart, the introduction of automobiles didn’t benefit you). Both of these effects were observed during the Industrial Revolution and contributed to foster negative reactions to machinery. What the critics did not realize at the time was that as jobs were lost in specific sectors and occupations, many more jobs—typically better, higher-paying jobs—were being created in other parts of the economy as lower costs allowed for more demand and more production of all sorts of goods. Similarly, in the U.S. today we have many fewer secretaries than we used to have—and hardly any drivers of horse-drawn carriages outside of Central Park; yet we have a lot more financial analysts, software programmers, and biotech engineers with no desire whatsoever to drive horse carts.