Irt~ industhial revolutionvi*Ludwig von Mises

MDLJW irt~ --INDUSTHIAL REVOLUTIONVI*Ludwig von Mises

An examination of the so-called horrors oj~ the “In­dustrial Revolution” and the persistent myth that industrial progress is a plot against employees.
Socialist and interventionist authors assert that the history of modern industrialism and especially the history of the British “Industrial Revolution” pro­vide an empirical verification of the “realistic” or “institutional” doctrine and utterly explode the “abstract” dogmatism of the economists.’

The economists flatly deny that labor unions and government prolabor legislation can and did last­ingly benefit the whole’ class of wage earners and raise their standard of living. But the facts, say the anti-economists, have refuted these fallacies. As they see it, the statesmen and legislators who enacted the factory acts displayed a better insight into reality than the economists; while laissez-faire philosophy allegedly taught that the suffer­ings of the toiling masses are unavoidable, the common sense of laymen succeeded in quelling the worst excesses of profit-seeking business. The im­Extracted from Human Action (Yale, 1949, 1963; Regnery, 1966), Chapter XXI, latter part of Section 7. Reprinted from The Freeman, February 1956

provement in the conditions of the workers, they say, is entirely an achievement of governments and labor unions.

Such are the ideas permeating most of the his­torical studies dealing with the evolution of mod­ern industrialism. The authors begin by sketching an idyllic image of conditions as they prevailed on the eve of the “Industrial Revolution.” At that time, they tell us, things were, by and large, satis­factory. The peasants were happy. So also were the industrial workers under the domestic system. They worked in their own cottages and enjoyed a certain economic independence since they owned a garden plot and their tools. But then “the Indus­trial Revolution fell like a war or a plague” on these people.² The factory system reduced the free worker to virtual slavery; it lowered his standard of living to the level of bare subsistence; in cram­ming women and children into the mills it de­stroyed family life and sapped the very foundations of society, morality, and public health. A small minority of ruthless exploiters had cleverly suc­ceeded in imposing their yoke upon the immense majority.

The truth is that economic conditions were high­ly unsatisfactory on the eve of the Industrial Rev-

olution. The traditional social system was not elastic enough to provide for the needs of a rapidly increasing population. Neither farming nor the guilds had any use for the additional hands. Busi­ness was imbued with the inherited spirit of priv­ilege and exclusive monopoly; its institutional foundations were licenses and the grant of a patent of monopoly; its philosophy was restriction and the prohibition of competition both domestic and foreign. The number of people for whom there was no room left in the rigid system of paternalism and government tutelage of business grew rapidly. They were virtually outcasts. The apathetic major­ity of these wretched people lived from the crumbs that fell from the tables of the established castes. In the harvest season they earned a trifle by occa­sional help on farms, for the rest they depended upon private charity and communal poor relief. Thousands of the most vigorous youths of these strata were pressed into the service of the Royal Army and Navy; many of them were killed or maimed in action; many more perished inglorious­ly from the hardships of the barbarous discipline, from tropical diseases, or from syphilis.³ Other thousands, the boldest and most ruthless of their class, infested the country as vagabonds, beggars, tramps, robbers, and prostitutes. The authorities did not know of any means to cope with these in­dividuals other than the poorhouse ~nd the work­house. The support the government gave to the popular resentment against the introduction of new inventions and labor-saving devices made things quite hopeless.

The factory system developed in a continuous struggle against innumerable obstacles. It had to fight popular prejudice, old established customs, legally binding rules and regulations, the animos­ity of the authorities, the vested interests of priv­ileged groups, the envy of the guilds. The capital equipment of the individual firms was insufficient, the provision of credit extremely difficult and costly. Technological and commercial experience was lacking. Most factory owners failed; compar­atively few succeeded. Profits were sometimes considerable, but so were losses. It took many decades until the common practice of reinvesting the greater part of profits earned accumulated adequate capital for the conduct of affairs on a broader scale.

That the factories could thrive in spite of all these hindrances was due to two reasons. First there were the teachings of the new social philos­ophy expounded by economists, who demolished

the prestige of mercantilism, paternalism, and restrictionism. They exploded the superstitious be­lief that labor-saving devices and processes cause unemployment and reduce all people to poverty and decay. The laissez-faire economists were the pioneers of the unprecedented technological achievements of the last two hundred years.

Then there was another factor that weakened the opposition to innovations. The factories freed the authorities and the ruling landed aristocracy from an embarrassing problem that had grown too large for them. They provided sustenance for the masses of paupers. They emptied the poor houses, the workhouses, and the prisons. They converted starving beggars into self-supporting breadwin­ners.

The factory owners did not have the power to compel anybody to take a factory job. They could only hire people who were ready to work for the wages offered to them. Low as these wage rates were, they were nonetheless much more than these paupers could earn in any other field open to them. It is a distortion of facts to say that the factories carried off the housewives from the nurseries and the kitchens and the children from their play. These women had nothing to cook with and to feed their children. These children were destitute and starving. Their only refuge was the factory. It saved them, in the strict sense of the term, from death by starvation.

It is deplorable that such conditions existed. But if one wants to blame those responsible, one must not blame the factory owners who—driven by self­ishness, of course, and not by “altruism”—did all they could to eradicate the evils. What had caused these evils was the economic order of the pre­capitalistic era, the order of the “good old days.”

In the first decades of the Industrial Revolution the standard of living of the factory workers was shockingly bad when compared with contemporary conditions of the upper classes and with the pres­ent conditions of the industrial masses. Hours of work were long, the sanitary conditions in the workshops deplorable. The individual’s capacity to work was used up rapidly. But the fact remains that for the surplus population which the enclosure movement had reduced to dire wretchedness and for which there was literally no room left in the frame of the prevailing system of production, work in the factories was salvation. These people thronged into the plants for no reason other than the urge to improve their standard of living.

The laissez-faire ideology and its offshoot, the

“Industrial Revolution,” blasted the ideological and institutional barriers to progress and welfare. They demolished the social order in which a con­stantly increasing number of people were doomed to abject need and destitution. The processing trades of earlier ages had almost exclusively catered to the wants of the well-to-do. Their expan­sion was limited by the amount of luxuries the wealthier strata of the population could afford. Those not engaged in the production of primary commodities could earn a living only as far as the upper classes were disposed to utilize their sIdil and services. But now a different principle came into operation. The factory system inaugurated a new mode of marketing as well as of production. Its characteristic feature was that the manu­factures were not designed for the consumption of a few well-to-do only, but for the consumption of those who had hitherto played but anegligible role as consumers. Cheap things for the many, was the objective of the factory system. The classical fac­tory of the early days of the Industrial Revolution was the cotton mill. Now, the cotton goods it turned out were not something the rich were ask­ing for. These wealthy people clung to silk, linen, and cambric.

Whenever the factory with its methods of mass production by means of power-driven machines invaded a new branch of production, it started with the production of cheap goods for the broad masses. The factories turned to the production of more refined and therefore more expensive goods only at a later stage, when the unprecedented im­provement in the masses’ standard of living which they caused made it profitable to apply the meth­ods of mass production also to these better articles. Thus, for instance, the factory-made shoe was for many years bought only by the “proletarians” while the wealthier consumers continued to pa­tronize the custom shoemakers. The much talked about sweatshops did not produce clothes for the rich, but for people in modest circumstances. The fashionable ladies and gentlemen preferred and still do prefer custom-made frocks and suits.

The outstanding fact about the Industrial Rev­olution is that it opened an age of mass production for the needs of the masses. The wage earners are no longer people toiling merely for other people’s well-being. They themselves are the main con­sumers of the products the factories turn out. Big business depends upon mass consumption. There is, in present-day America, not a single branch of big business that would not cater to the needs of

the masses. The very principle of capitalist entre­preneurship is to provide for the common man. In his capacity as consumer the common man is the sovereign whose buying or abstention from buying decides the fate of entrepreneurial activities. There is in the market economy no other means of acquiring and preserving wealth than by supply­ing the masses in the best and cheapest way with all the goods they ask for.

Blinded by their prejudices, many historians and writers have entirely failed to recognize this funda­mental fact. As they see it, wage earners toil for the benefit of other people. They never raise the question who these “other” people are.

Mr. and Mrs. Hammond tell us that the workers were happier in 1760 than they were in 1830.~ This is an arbitrary value judgment. There is no means of comparing and measuring the happiness of dif­ferent people and of the same people at different times. We may agree for the sake of argument that an individual who was born in 1740 was happier in 1760 than in 1830. But let us not forget that in

1770 (according to the estimate of Arthur Young) England had 8.5 million inhabitants, while in 1831 (according to the census) the figure was 16 million.⁵ This conspicuous increase was mainly conditioned by the Industrial Revolution. With re­gard to these additional Englishmen the assertion of the eminent historians can only be approved by those who endorse the melancholy verses of Sopho­cles: “Not to be born is, beyond all question, the best; but when a man has once seen the light of day, this is next best, that speedily he should return to that place whence he came.”

The early industrialists were for the most part men who had their origin in the same social strata from which their workers came. They lived very modestly, spent only a fraction of their earnings for their households, and put the rest back into -business. But as the entrepreneurs

the Sons of successful businessmen begs trude into the circles of the ruling clas

born gentlemen envied the wealth of the and resented their sympathies WI~l~l

movement. They hit back material and moral conditions and enacting factory legislatio

The history of capitalisp~ as in all other capitalist. ço~ unceasing tendency ,t

the wage c~ -tion coincided.’

legislation an4

the one hand and with the increase in the marginal productivity of labor on the other hand. The econo­mists assert that the improvement in the work­ers’ material conditions is due to the increase in the per capita quota of capital invested and the technological achievements which the employ­ment of this additional capital brought about. As far as labor legislation and union pressure did not exceed the limits of what the workers would have got without them as a necessary consequence of the acceleration of capital accumulation as com­pared with population, they were superfluous. As far as they exceeded these limits, they were harm­ful to the interests of the masses. They delayed the accumulation of capital, thus slowing down the tendency toward a rise in the marginal produc­tivity of labor and in wage rates. They conferred privileges on some groups of wage earners at the expense of other groups. They created mass un­employment and decreased the amount of prod­ucts available for the workers in their capacity as consumers.

The apologists of government interference with business and of labor unionism ascribe all the im­provements in the conditions of the workers to the actions of governments and unions. Except for them, they contend, the workers’ standard of liv­ing would be no higher today than..it was in the early years of the factory system.

It is obvious that this controversy cannot be set­tled by appeal to historical experience. With re­gard to the establishment of the facts there is no disagreement between the two groups. Their an­tagonism concerns the interpretation of events, and this interpretation must be guided by the the­ory chosen. The epistemological and logical con­siderations which determine the correctness or in-correctness of a theory are logically and tem­porarily antecedent to the elucidation of the histor­ical problem involved. The historical facts as such neither prove nor disprove any theory. They need to be interpreted in the light of theoretical insight.

Most of the authors who wrote the history of the conditions of labor under capitalism were ignorant of economics and boasted of this ignorance. How­ever, this contempt for sound economic reasoning did not mean that they approached the topic of their studies without prepossession and without bias in favor of any theory. They were guided by the popular fallacies concerning governmental om­nipotence and the alleged blessings of labor un­ionism. It is beyond question that the Webbs as well as Lujo Brentano and a host of minor authors

were at the very start of their studies imbued with a fanatical dislike of the market economy and an enthusiastic endorsement of the doctrines of so­cialism and interventionism. They were certainly honest and sincere in their convictions and tried to do their best. Their candor and probity exonerates them as individuals; it does not exonerate them as historians. However pure the intentions of a his­torian may be, there is no excuse for his recourse to fallacious doctrines. The first duty of a histor­ian is to examine with the utmost care all the doc­trines to which he resorts in dealing with the sub­ject matter of his work. If he neglects to do this and naively espouses the garbled and confused ideas of popular opinion, he is not a historian but an apologist and propagandist.

The antagonism between the two opposite points of view is not merely a historical problem. It refers no less to the most burning problems of the present day. It is the matter of controversy in what is called in present-day America the prob­lem of industrial relations.

Let us stress one aspect of the matter only. Vast areas—Eastern Asia, the East Indies, Southern and Southeastern Europe, Latin America—are only superficially affected by modern capitalism. Con­ditions in these countries by and large do not dif­fer from those of England on the eve of the “In­dustrial Revolution.” There are millions and mil­lions of people for whom there is no secure place left in the traditional economic setting. The fate of these wretched masses can be improved only by industrialization. What they need most is entre­preneurs and capitalists. As their own foolish pol­icies have deprived these nations of the further en­joyment of the assistance imported foreign capital hitherto gave them, they must embark upon do­mestic capital accumulation. They must go through all the stages through which the evolution of West­ern industrialism had to pass. They must start with comparatively low wage rates and long hours of work. But, deluded by the doctrines prevailing in present-day Western Europe and North America, their statesmen think that they can proceed in a dif­ferent way. They encourage labor-union pressure and alleged prolabor legislation. Their interven­tionist radicalism nips in the bud all attempts to create domestic industries. These men do not com­prehend that industrialization cannot begin with the adoption of the precepts of the International Labor Office and the principles of the American Congress of Industrial Organizations. Their stub­born dogmatism spells the doom of the Indian and

Chinese coolies, the Mexican peons, and millions of other peoples, desperately struggling on the verge of starvation.
Notes

‘The attribution of the phrase “the Industrial Revolution” to the reigns of the two last Hanoverlan Georges was the outcome of deliberate attempts to melodramatize economic history in order to fit it into the Procrustean Marxian schemes. The transi­tion from medieval methods of production to those of the free enterprise system was a long process that started centuries before 1760 and, even in England, was not finished in 1830. Yet, it is true that England’s industrial development was con-

siderably accelerated in the second half of the eighteenth century. It is therefore permissible to use the term “Industrial Revolution” in the examination of the emotional connotations with which Fabianism, Marxism, the Historical School, and Institutjonahsm have loaded it.

‘J. L Hammond and Barbara Hammond, The Skilled La­bourer 1760-1832 (2d ad. London, 1920). p.4.

³1n the Seven Years’ War 1,512 British seamen were killed in battle while 133,708 died of disease or were missing. Cf. W. L. Dorn, Competition for Empire 1740-1763 (New York, 1940). p. 114.

⁴J. L. Hammond and Barbara Hammond, bc. cit.

³F. C. Dietz, An Economic History of England (New York,

1942). pp. 279 and 392.