[126] The Great Transformation
end*; since the 1840s projectors in business were simply promoters of
definite ventures, not any more the alleged discoverers of new applica-
tions of the universal principles of mutuality, trust, risk, and other ele-
ments 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 sys-
tems 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 explora-
tion 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 subordi-
nated 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"
1
; 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 Chresto-
mathic 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 laissez-
faire with legislative quietism, Bentham saw in it no obstacle to broad-
sides of reform.
* 1832.
1
Stephen, Sir L., The English Utilitarians, 1900.
Political Economy and the Discovery of Society [ 127]
Before we proceed to the answer which Malthus, in 1798, gave to
Godwin and with which classical economics properly begins, let us re-
member the times. Godwin's Political Justice was written to counter
Burke's Reflections on the French Revolution (1790). It appeared just be-
fore the wave of repression started with the suspension of habeas cor-
pus (1794) and the persecution of the democratic Correspondence So-
cieties. 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 TheRights 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 ar-
tificial 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 com-
plained 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 inev-
itable result of'allowances' was to keep wages down to the lowest level,
and even to force them below the limit corresponding to the irreduc-
ible 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 re-
sult arrived at was that the so-called 'poor-rate' meant an economy for
the employers, and a loss for the industrious workman who expected
[ 128 ] The Great Transformation
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 vio-
lently 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 ex-
plain why the low level of rural wages was not traced by them to Speen-
hamland, which was its actual cause, but was regarded as incontro-
vertible 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 ortho-
dox economics to seek its foundations in naturalism was the other-
wise 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 cer-
tainly 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 actu-
ally 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
* Mantoux, P. L., The Industrial Revolution in the Eighteenth Century, 1928.
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