Movements of Thought in the Nineteenth Century
Chapter 9 The Industrial Revolution -- The Quest for Markets
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I HAVE pointed out, in a general way, the great changes that took place in France during the Revolution. The soil passed over from the feudal lord to the peasant who worked the soil. In England this process had never taken place on any such scale. On the contrary, the development of agriculture in England tended to bring more and more of the allotments of land into the hands of single farmers, single landowners. The lands could be worked more profitably that way. The processes of agriculture which were being introduced in England could be worked more profitably on large holdings than on the little holdings that the tenant had been able to work. The older, medieval production had been intensive rather than extensive. It was built up by old feudal conditions and had no relationship to farming proper. If this was to be changed, it was necessary to bring the scattered holdings together under a single head. The result of this was that more and more of the tenants became farm laborers, and the direction of farming passed from the hands of the peasant into the hands of the larger farmers. Where in France he worked them himself, in England the allotments that belonged to the peasant passed under the control of the landowner or the large farmer, and the farmer was taken out of that direct control over the process of agriculture which was characteristic of conditions in France. Under proper methods of farming there was no need for the number of hands that were required under the older method. The land could be more profitably operated by a smaller number of men. Thus there grew up a surplus of population upon
(170) the land. This is one of the conditions that favorably prepared the ground in England for the rapid development of what is called the Industrial Revolution.
We find a very varied background out of which this economic change took place. First of all, there are the markets, the growing-up of voluntary organizations for the distribution of goods, which were able to adjust themselves to new demands. We have the development of the credit system, which had grown up under other conditions and for other purposes, being carried over into business. We have a change in the religious attitude, which brings a certain discipline of mind into the process of business. And then we have the flowering of the socalled Industrial Revolution, in which production is taken away from the home and is carried over into more favored situations in the factory, in which the artisan's occupation is taken to pieces, broken up into a whole series of different tasks, and these tasks given over, as far as possible, to machines driven by water power, steam power, and, later, electricity, so that the man in occupation becomes a part of a vast machine production. This is the process which was taking place and of which the shifts in population connected with the Industrial Revolution are only parts.
The shift of population, of course, followed the factory. With the older textile industry, the spinning and weaving went on in the homes. The capitalist sent his employees about, carrying certain of the raw materials which they brought back as finished products. With the factory, the different looms were brought to a single place where they could be driven by power. The population inevitably followed the loom to the factory, and in the great industrial centers we have the building of the factory city. This took the individual definitely away from the soil. All feudal privilege, all feudal organization, all feudal administration, gathered about the relation of the individual to the soil. The feudal lord was one who was lord over his land. He held it, perhaps, under another, and he under another, until they came to the highest; but the individual belonged to the
(171) soil. The social organization was determined by this relationship to the soil.
The breakdown of this feudal system and the concentration of large units of population around the new factories are the features of the Industrial Revolution which are spoken of most often. Back of this, however, lay the development of the larger market, a market which required production on a larger scale. Various social structures answered to this demand. What I want to point out in this connection is that such a larger market means, of course, a more highly organized society; it means bringing people into closer relationship with each other in terms of economic needs, supplies, and so making out of groups which had been isolated from each other, partially unified groups. That is the social organizing process that goes on in economics. It needs to be emphasized because in the economic process itself we are apt to abstract from the total picture everything except that which is involved directly in the process. For example, when we are buying and selling, we consider only the prices, their advantage or disadvantage. We put economic men over against us, and we regard ourselves simply as economic men. In business, religion is supposed to be abandoned. The dictum of caveat emptor is one that lies back of this attitude. It answers to what we term the "materialistic" view of life. And yet all the advances which have taken place in the modern world have been dependent on this bringing people together in terms of their needs, wants, and supplies as these are met in an economic fashion. And this very abstraction of the economic from the other social processes has been of great importance and of great value. It is possible for people to buy and sell with each other who refuse to have anything to do with each other otherwise. That is, it is possible to hold people together inside of an economic whole who would be at war otherwise. Economic organization is of importance in holding together parts of a society which might, without it, be distinctly and mutually at variance. If you will take it, you will find this view of society from the perspective of economic development very interesting.
(172) I shall refer to it again when we come to the development of socialism.
For our immediate purpose it is important that we have in mind an outline of the conditions under which the Industrial Revolution sprang up. It is a period in which an expansion of an economic character was taking place with the development of larger markets and the gradual development of methods of production which would meet this larger demand.
This involved changes in social conditions which are to be noted, in a general way, as characteristics of the Western world. Among these is the appearance of arbitrary organizations of all types in the midst of fixed institutions. Out of this arose in large degree the medieval city, with its groups of individuals not immediately connected with the soil. Under the old feudal conditions, of course, the population was allotted to the soil, belonged to it. The city, growing up first as the fortress, the center for a garrison, and as a place in which the ecclesiastical powers centered, tended to become more and more a trading center; and there grew up guilds which supplied the immediate needs of the community and, besides that, carried on the trading which connected these communities with the wider economic world. The growth of these different voluntary organizations played a large part in the development of the industry of the modern world and invited those mechanisms which responded to the demand. What was essential was the larger demand and then a sort of a social mechanism that could answer to this.
We find in the middle of the eighteenth century a very considerable increase in population, which it is rather difficult to explain. Unquestionably, the beginning of this lay in the earlier part of the century and, of course, affected conditions, bringing with it the larger markets at home and abroad of which I have already spoken. I think no one has adequately pointed out just what the conditions were that brought this about. Probably to a large extent it represented improved conditions of health. In other words, the death-rate probably decreased; and, with the dropping of the death-rate, with a larger number of children,
(174) as well as adults, surviving, the population as a whole commenced to increase steadily. With this increase came an increased demand for occupation on the part of the populations, together with an increase in the demand for goods. Altogether it is a very complex problem, but in general we can bring it back to the development of larger markets and of institutions which were sufficiently elastic and responsive to meet the needs of this market.
I have already pointed out what the characteristics of this development were. The factory was the center at which production was carried on under better economic conditions than those found in the home. The most important of these changed conditions was the subdivision of production into a number of tasks. These could be carried on more rapidly by separate individuals, and so the process of creation was simplified. And, as it was simplified, the way was opened for the machine; and with this came the stimulus to invention. With this stimulus to invention came also the demand for power with which to drive the machines. I will insist that this is not simply a question of the unusual development of inventive power. We assume that, by and large, each generation carries with it as much inventive genius as any other, and that it belongs to one community as much as to any other. The difference lies in the demand, a demand that goes back to such a situation as this which I have just presented, one in which production itself is analyzed, broken up into a series of separate tasks which are made sufficiently simple so that a good many of them can be carried on by machines. The result is that the laborer tends to become more and more a machine-tender, a person who keeps the machine going. He becomes a part of the machine activity. The demand implies a difference between the new condition and the old; it implies that the means of production which had been used were not adequate. It implies a general shift in the economic situation. Of course, it also implies that there are those able to make use of such apparatus; that there is available labor which can be utilized, can be put into new vocations. This,
(174) I say, is possible only where you can get power to drive the machine which is greater than mere man power. Water power, the development of the steam engine with the demand for fuel such as that provided by coal, the consequent development of the coal industry-this whole process can be traced back to its beginnings in the sixteenth and seventeenth centuries, and that not only in terms of a process but also in terms of the attitude of mind, in terms of the industrial discipline of the community. There are, of course, other changes which, perhaps, are made too central, such as the development of iron and coal. Machinery was essential to the development of the factory to its full productivity. Machinery meant iron. The power to drive the machine meant coal. And there in England, at that time, close to the surface, was the ore and the coal. Conditions, then, were very favorable to the flowering-out of this rapid productivity, with all the changes that it carried with it. But this was a result, not a cause of the wider movement.
Of particular importance was the shift in the population, and with this the breakdown of the feudal conditions which still persisted, on the social side, in England. Most of the population had been governed by the squire and the curate, whose positions were those determined by the whole feudal situation. The individual peasant or farmer worked the soil belonging to another person. He held it as a tenant. His position in the community was determined by his relationship to the soil. While in France there had developed a centralized government which took over more and more of the control of production, in England there grew up the squirarchy, a form of legal government through the squire, that is, through the justice of the peace. This had an astonishingly large part in the government of England. It was carried out by men relatively untrained in matters of law and administration. The squire and curate were central figures of this period, and the peasant occupied a position of subjection. The central power of the government expressed itself through the squire. He was an aristocrat. He had, of course, higher courts above him; and when serious issues arose,
(175) he might be brought into a position in which his power would be questioned; but under ordinary conditions the squire represented the government. It was a modern feudal condition, a feudal condition, however, in which the feudal lord was himself definitely interested in what was still the greatest form of production, agriculture. The feudal lord was a great landowner and one who introduced better methods of production. He was interested not only in this production but also in the stability of things, in the maintenance of peace. In this he was the representative in his own district, representing the local government as over against the central government. But his power was very great, greater perhaps socially than it was in terms of administration, than it was in legal terms, so that the average individual felt himself definitely under his superiors, and what he produced came to him under conditions which were dictated more or less by the social order of which the squire was the head.
The changes to which we have referred shifted this relation by moving the population, or portions of it, from the soil to the city; and in the city the individual was under no feudal lord. Here his task was one which he himself elected, or at least that was what seemed to be the situation. He came as a day laborer. As a day laborer he needed no skill. The skill which he had as a weaver, for example, was of no service to him in working powerdriven machines. He came in, then, as a day laborer in return for a wage, and the wage belonged to him not in terms of the product of the soil but of his own effort. He got money in return for his services instead of for the products of the soil, and he got it under no feudal conditions at all. This freed him, in a certain sense. The wage was all too often a starvation wage, but it was his own. It separated him from the soil.
There is one characteristic of the city as it appears in the modern world as distinct from the city of the earlier Graeco-Roman world-that is the appearance of voluntary organizations in the Western world. At first, the cities grew largely out of fortified places, and these fortifications or garrisons led to the appearance of groups of warriors who entered into volun-
(176) -tary agreements with each other for various purposes which they had in common. They could shift from one place to another. Then there also appeared in the church various voluntary organizations, among the ecclesiastical representatives. These were succeeded by the organizations out of which the guilds arose, that is, those occupied in production; and they had their own organization with something of their own control. In all the groups-the warrior groups, church groups, industrial groups, in the so-called university or school groups-we find, in the Western community, voluntary organization.
I suppose we may explain these in part by the comparatively chaotic conditions. The new communities grew up in the decay of the old ones. The mechanism for the control of the com-, munity rotted out. New methods of control had to be built up gradually. And they were built up, first of all, over against an ideal situation. That is, Europe conceived of itself as belonging, above all else, to the Holy Roman church. And, back of that, lay the assumption of a political organization under the church, the Holy Roman Empire. Each of these organizations carried with it an assumption of an order of society which was not realized. The church presupposed a community, a blessed community, in which the interest of one was the interest of all. In it were devout worshipers of God, persons carrying out his behests, utterly unselfish, having the nature of the so-called "saint" of the period. This was the ideal which the church presented, an ideal which was anything but satisfied with the actual order of things. During the so-called Dark Ages, Europe was in a state of constant warfare between very little groups. It was a period in the Western world in which there was such chaos, such continuous, unmitigated hostility between little groups as there has not been since. And yet, Europe had accepted the conception of the church. It was assumed that the new world would exist in the New Jerusalem, in the world to come. In this present world men were under probation. There was an ideal of society, then, not yet realized, but one which remained in men's minds. And the same situation existed in
(177) the political organization. There was one political head; and all those under him, the various feudal lords, were subject to the Roman emperor. The actual subjugation was largely fictitious, but this assumption lay in men's minds. Europe was a community in which there were ideals of social organization which were not actually realized.
But the fact that they were not realized was an essential part of the life of the time. The world was supposed to have been created by God that men might realize their ideals; and God knowing that they would not realize them, that they would sin, fall from grace, appointed such institutions as the church and state that were to carry on, so to speak, until the day of the Last Judgment. The world was not conceived of as being the sort of place in which such a society as men conceived could actually exist. But it was there as an ideal which ought to exist; and because it did not exist, men were in a state of sin. The institutions of the time were built up definitely with reference to man's being in such a state of sin. That is, the ideal, in one form or another, was a definite part of the life of the community, an ideal which was not realized. It is that situation, and the comparative chaos of the period which lent itself to the appearance of these voluntary organizations, of which we have been speaking.
Perhaps the form of this with which we are most familiar is the appearance of the different religious groups, of the so-called "heresies" which were constantly arising. Men conceived of themselves as having received inspiration from God. They undertook to interpret the monuments of the church in a different fashion than the church itself, and gathered together those who agreed with the new interpretation. Thus, there arose new religious bodies. These were continually springing up throughout the whole medieval period. For example, during the Reformation, we have the appearance of the Protestants. This was nothing but another expression of the breaking-up of the community into voluntary organizations. The same thing took place on the political side, particularly with the appearance of the free cities
(178) - cities that worked themselves out from under the control of overlords, bought their privileges for themselves, bought the opportunity to pay their own way. And out of this arose cities that were relatively free, which had their own peculiar place within the Holy Roman Empire. And they grew up largely about industrial conditions.
What I want to point out with reference to these various voluntary organizations-political, economic, military, or among the students of the different universities who gathered together in national groups according to the different countries from which they came or in accordance with their interests-is that they came to play a part in the actual control of society. The most striking example of such a process in our setting is the political party, the party that has no recognized place in the constitution of the state and yet which is an essential part in the government of the community. That is one characteristic of the whole Western life, of the whole Western community the appearance of voluntary organizations gathering about the ideals which lay back of the various institutions but which were riot definitely incorporated and expressed in them-the ideals of the state, of the church, of the university. In all these there were voluntary organizations which grew up and came to play a part in the actual control of the community, of the church, of the school or university. One finds this in the Western community; one cannot find it in the Eastern.
The phase of this process in which we are interested at present is the economic. The guilds as such were voluntary organizations in which the artisans got together to control their markets, their prices, and then got a more or less recognized position, came into relationship with the feudal overlords or with cities, won rights and privileges. With the peasants themselves it was relatively easy for new types of organizations to arise. First of all, there were organizations of the sort of which we have been speaking, that is, of weavers, spinners, persons having a common interest in their occupation, who formed groups in order to try to get hold of certain markets, to get
(179) their goods bought for better prices, to establish certain monopolies.
But, relatively early, there arose within these organizations the capitalist, who brought in a different type of economic structure. The form which appeared in the guild was a social structure in which men got together with common interests, protecting each other, trying to get the best prices they could, trying to control their markets, get better distribution for their goods. But with the capitalist another situation arises, namely, that of a person who has some accumulated wealth and who can use it for purposes of increased production and distribution. With the increase in the amount and the expense of apparatus, with the advantage which could be obtained by holding the product so that it could be sold at a profitable time, ready capital was found to be of great value. And with this accumulation of wealth there arose the capitalist, who brought about the new structure.
Now, this is the process which we think of as having developed late in the eighteenth and early in the nineteenth centuries. We can, however, trace it out very much earlier. There was a gradual development of the capitalistic type of industry, owing to changes in the social situation, owing to advantages that would come to those who could gain control over wealth for the production of apparatus and for the holding of goods that were to be put on the market in order to get better prices and in order to be able to get the goods to larger markets and to markets at more distant points. For capitalistic enterprises we need only to go back to the commercial voyages of Drake, during the reign of Queen Elizabeth. Queen Elizabeth had a large proportion of the stock in the undertaking. Capitalistic undertakings were going on, then, as early as this; the method of operation was developing, waiting simply for the situation that would further its increase.
That situation was, as 1 have said, the development of larger markets, especially for such goods as textiles, which could be created in much greater quantities as the demand increased. The sort of market that one gets in a closed community is fixed.
(180) Only a certain number of shoes can be worn, only a certain amount of clothing is needed. The guild represented a group that could answer to that particular demand. Standards could be fixed. But there was no opportunity in such a situation for the development of industry on any large scale. But when it became possible to ship English cloth to Europe, to send it off into Russia, down into Portugal, the markets naturally became larger. When the market in England and Europe itself increased, there was a tendency to develop this on a still larger scale. The market was continually growing. There was also the opening-up of the New World, with its treasure brought in in the form of precious metal, and the beginning of a community that demanded things also. This constant expansion of the market and the increased number of things that could be purchased on a large scale was dependent on apparatus for their production. But the apparatus which was there was largely that utilized for the markets belonging to these closed communities, so that we have just the situation in which there would be a growing stimulus to the inventor for the production of apparatus that should lead to the production of goods on a large scale.
There was also growing up the capitalistic organization, banking institutions that appeared largely in response to a demand for national dynastic loans which monarchs had to put through to carry on wars, which the church put through to support its manifold activities. Banking came to be regarded as a legitimate form of usury. This contrasted with the previous attitude. In general, the whole of the medieval world was under the influence of the doctrine of the church that usury was not legitimate, that interest was illegitimate. If you borrowed something, it was your duty to return it in as good condition as received; but beyond that no claim could he made. Charging interest was an outlawed practice. It was a curious thing, though, that just at this time church officials themselves, as well as monarchs, were borrowing on a large scale. That was recognized as fairly necessary. But it was still not considered legitimate for ordinary business. Here, again, you come back
(181) to the idea of a closed market, a situation in which there was no call for capitalistic industry. The growth of this capitalistic industry was one which corresponds to the process to which I have been referring, one which had been taking place gradually from the time of the Renaissance.
It is rather interesting to see that the Protestants, especially the Calvinistic Protestants, were those who adjusted themselves most rapidly to this economic change. Luther's doctrine was one that spread among the peasants. It was one which he cartied into the moral atmosphere which belonged to that phase of the Reformation. It had been an attitude of the church; but it was also retained as an attitude of the reformed dogma, which came back, of course, to faith as over against works, to the soul's immediate approach to God. But Lutheranism was largely a peasant movement. It was not one that had any particular sympathy with the making-up of the modern city. On the other hand, the Calvinistic movement is a city movement. Of course, Calvin belongs to Geneva. What the Calvinists recognized was that men were put on earth, as we have seen, to carry out their problem under the conditions that God set for them. And Calvinists recognized business as part of these conditions. Being strenuous in business meant serving the Lord. As part of the dictum taken over by Calvin, it was recognized that one could not carry on business, especially in the city, without capital. As a result, Calvin was led to recognize the legitimacy of interest. And, interestingly, he took over something of the discipline of the church itself into business. There was no difference between it in the two cases. The discipline that belonged to the artisan was the determination of standards of goods and produce. But there had not been any discipline in the business which centered about money as such. This was introduced into the picture by capitalism. The form of business which we speak of as capitalistic grew up, in its earliest form, in close connection with the doctrine of the Calvinists. It belongs to the Protestant groups, especially to the Calvinists, and
(182) in the various new sects, as in England, which opposed themselves to the established church.
In order that the various processes of the new capitalistic setup might be carried out, capital had to be provided. That is, men had to find the means of production, and wealth had to be paid into the hands of the producer in advance of the actual returns. The credit system had to be worked out. The whole banking process was carried over into industry, and it came to be recognized as necessary that money which had been held in the form of wealth should be utilized for production and that such a mechanism as this had to be paid for just as much as the machine had to be paid for. The result was that capital was accumulated and put into the hands of the producer so as to enable him to produce on a larger scale. The capitalist must pay for the money that is put at his disposal. Calvinism, which was the city form of the Reformation, recognized these needs of business, and thus recognized the legitimacy of interest as against usury. It is important to note that change, for it represents our economic development from the medieval situation over into the modern situation.
One of the striking illustrations which we have of this is in Shakespeare's play, The Merchant of Venice, a picture of the old order against the new, Shylock representing a figure who was objected to and yet recognized, in some sense, as a person fitting into the needs of the community, but also as one in a position to take advantage of his opportunity. There was a struggle going on between the old order and the new. And it was the Calvinistic group which recognized the change as it was taking place and who came to regard the business process as one which was instituted by God, one in which man was called upon to carry out with vigor-it was his duty, laid upon him by God. Man was to be strenuous in business, serving the Lord. This was the motto of the Calvinist, and with it was carried over into business the discipline of the religious life. Men were to put into the former the same determination, the same conscientiousness, as had marked their attitude toward the
(183) latter. To a very considerable extent this discipline of the modern economic type, that which pursues the success of business and which pursues it with determination and intelligence, was carried over by the Calvinistic regime from its religious side into the economic process. It is of very great interest to recognize this passage. We do not find it in the Lutheran community, in the older Catholic, ecclesiastical, Church of England group. At first it was limited to the Calvinistic group, where the application of their religious discipline taught that the individual in all his tasks, even the most minute and the most materialistic, could still be serving God if he carried out his duty conscientiously. It was a combination that played its part, not only in England, but in American life in Puritanism, a combination of conscientiousness and economic thrift, with the assumption that the two go together, that man is put here to be economically successful. The Puritans turned back to the Old Testament and profited greatly by the Proverbs, under this new interpretation.
So we see clearly that the great changes taking place were not those that appeared upon the surface. They pass in history under the term of the Industrial Revolution, which is supposed to have taken place during the end of the eighteenth century and the beginning of the nineteenth. The study of economic history has made it evident that this process had already started both on the Continent and in England much earlier. It goes back to that period in which the agricultural industry of England changed from the raising of grain to the raising of sheep and the weaving of cloth. The development of the population there turned its attention to the development of wool and of the woolen industry. This naturally gave rise to the cloth industry, to the spinning and the weaving of the wool, which were processes that could be carried on in those days in the houses of tenants on the land. The wholesale industry was one of men who provided the wool, took it about to these different houses, and then gathered it up afterward. There was considerable capital involved in this; and out of this com-
(184) -bination we have the development of capitalism, as we use the term, together with the shift in industry itself from that of the soil to that of the spinning and weaving of textiles. Of course, the development of other industries came along at the same time. The mining industries were quickened; the beginning of the use of coal was appearing; and with the development of new machines at both ends of the process came the stimulus to invention. Invention is dependent, of course, in one sense on the endowment of the inventor; but that sort of endowment is, presumably, always present in approximately the same degree in different periods. The question whether it gets expression or not depends upon the demand for differences in apparatus.
If you look back over the ancient world, you see a society which for a thousand years or more had used practically the same sort of tools, had used the same mechanisms of warfare, of farming, of producing practical needs. Of course, we find a gradual perfection in these. They vary all the way from the crudities of a semi-barbarous period up to the highly organized mechanisms of the factories of the period of Roman civilization. And yet, actually, the tools used were essentially of the same sort. We cannot find through the whole period of the ancient world-we will say stretching through the whole Graeco-Roman period-an invention which changed the process of life, not even in the field of warfare. There, of course, stimulus was the greatest. They had found out different modes of warfare. But these different methods belonged to different nations. The Persians, for example, used vast armies with chariots in front and with more mobile forces in the wings. The power of the army was in its mass, it simply rolled over its opponents, crushing them out. The strength of the Greek army, on the other hand, lay in the phalanx, in the close organization of the men. It was smaller, could drive with lances right through the clumsy Persian army, and then come back at it from the rear. The Roman legion was a still more mobile organization. It was organized in small units called "maniples." Men were armed with
(185) javelins as missiles, and with short swords. They could penetrate into the Greek phalanx and break it up. The Roman legion, when broken, could come together again, because it was made up of separate units. And the Roman legion was triumphant. It was the most flexible, the most effective, structure among the armies of the ancient world. We find the same formation used throughout the period of the Persian Empire, among the Greeks, among the Romans. We find it perfected as we read the history of it, but this is simply the perfection of an accepted order. Of course, all the armies used some missile; but the missile was not the important weapon. And there was no invention of new types of missiles. It is a curious thing to pick up a book which presents the antiquities of the medieval world and compare it with the history of the armed forces of Europe from the beginning of the world up to the later periods. We think of the medieval world as rather static in character; and yet the armed forces of Europe were changing radically throughout the whole period in their methods of fighting, in the laying out of their campaigns. In a comparatively short time they advanced from the soldier who was lightly armed to the heavily armed knight, who, when he fell from his horse, had to be helped on again. Then we have the archer coming in and unhorsing the knight.
In such a book of antiquities we find very rapid changes not only in the fashion of fighting but also in the fashion of dress. And we find not only changes in fighting and dress but also in arrangements for housing people. The ancient house was most perfectly presented in the house of the god, the temple, which reached perfection in the Greek architecture; but it was not a different sort of house from that used for other purposes, for living. The house of the feudal lord was the castle; it represents changes from a mere hovel to a structure forty feet thick which dominated the whole area. The change in the fashion of housing is shown not only in these but also in the churches. The Greek temple was the home of the god, a perfected house. The home of the god of the medieval religion was a house into which the god entered because it shut out the rest of the world. It was built to
(186) shut the world out. The light of the world without was brought in through many-colored windows. The whole movement within was a movement upward. The effect on the worshiping people was to exclude the outside world. The Greek god was simply the first citizen in the community; he invited others to come into his house. Medieval Gothic architecture shut the rest of the world out and tried to invite the population within; the church was the house of a god against whom they had sinned and from whom they must get mercy. In the expression of these ideas we have a structure which is changing from generation to generation.
If we turn back to the feudal world, to the castle, we find it expressing an idea. The feudal lord was not simply a man who was in immediate political and military control over a certain district, including the peasants or serfs, the tenants who belonged to the soil. He was also the representative of the Holy Roman Empire. And it is interesting to see what hold this ideal of the Holy Roman Empire had upon the whole population of Europe. It was true then, as always, that it was "neither Holy, nor Roman, nor an Empire"; and yet it had a romantic hold upon the imagination of the people of Europe. They believed they belonged to it. They recognized it as a political order that had to exist just as the community pictured in the gospels of Jesus was a community that had to exist. It existed in man's mind, even though unconsciously; and the feudal overlords were the representatives of this empire. They were housed as they were and defended as they were because they represented it. That is the point I want to bring out-the structure of the medieval world expressed ideas. Of course, any house can express an idea, that of living in it, of protection from the climate, of providing means of getting food, of bringing about social life; but we do not think of a house as an idea, but simply as a house within which these activities of various sorts have to go on. And the same thing could be said of the religious life as it took place in the Greek temple. One did not think of the temple as expressing the ideas behind Greek religion. It was a place where men met the gods, so to speak. A man merely
(187) met the god in his temple. The power of the god was manifested there. But the church, as such, expressed an idea, an idea which was not religion. It ought to have found expression in religion, but it did not; so it was expressed in stone and mortar , through the architecture. just as did the castle, so the church expressed the idea of the Holy Roman Empire.
As an illustration of this take Goethe's Gotz von Berlichingen, and you will see the hold which these ideas had on medieval Europe. The dominance of ideas which have to be expressed and the expression of the ideas varies from generation to generation, from artisan and artist of one period to another. Where the idea is actually embodied in the apparatus itself, we do not think about the idea as distinct from the structure; but in the medieval world the idea was expressed as an idea.
All this is a part of the whole series of very interesting conditions leading up to the appearance of the Industrial Revolution. What I want to warn you against is the assumption that it suddenly appeared at the end of the eighteenth and the beginning of the nineteenth century. You can trace it all way back to the period of the Reformation and beyond. It grew out of the gradual change in situation which led, first of all, to a larger market that could utilize the voluntary organization of which I spoke earlier, which could make use of the apparatus already present-such as the growing presence of capital in connection with the obligations of the church and state.
What is of particular interest in connection with this is the assumption of a sort of economic community that lies behind that whole economic process. Europe, of course, recognized itself as belonging to a single spiritual community, Christendom; but that was largely broken up under feudal conditions, and then there appeared national states, particularly those of Spain, France, and England. Germany lagged behind. The larger community was broken up, and warfare was a very large part of the interrelation of these communities with each other. The economic community, on the other hand, was a community that looked for peaceful conditions. The individual might profit
(188) by war, but economic procedure looked for peaceful conditions. Also, it brought together people who were separated nationally, in language, in customs. The economic community brought them together on a common basis. It was more universal in one respect than the church. One could carry on economic processes with the infidel, with the man who was an outcast from religious or political communities. One could carry on economic processes with the savages. It was the most universal aspect of the life of this period-more universal than the church itself, so far as intercourse between peoples, between communities, was concerned. It was, therefore, a process that abstracted very largely from the fixed standards of the community.
We must keep clearly in mind the point which I presented in the last chapter, because it had a very definite bearing upon the appearance of Adam Smith's In Enquiry into the Nature and Causes of the Wealth of Nations and the development of the economic school of which Adam Smith was the great representative. Hume belonged to the same period, and Smith carried over some of the former's thought in his own discussion of finance. A development of this point of view also took place in France in the appearance of the physiocrats as over against the mercantilists. In this doctrine we have the development of a point of view which recognizes a form of community that lies back of political and ecclesiastical organization. The very title which Adam Smith gave to his work is illustrative of this point of view-the wealth of nations, a wealth that belonged to nations, as if they constituted one community. It is a .reaction against what is called the "old mercantilist political economy." This economy was directed toward getting just as much of the precious metals as possible. It was a political economy of the man who was the direct servant of a dynast, of a monarch who had to finance a court and an army. Such a minister looked toward the gathering of precious metals into the realm. And any form of industry was fostered which would bring precious metals in and hold them in the country where tax-gatherers could get hold of them, the latter being, presum-
(189) -ably, a desirable phase of the situation. The merdantilist looked upon wealth in terms of precious metals and undertook to control industry and commerce so as to bring them into the realm. Mercantilism did not go very deeply into conditions of production and wealth themselves. What it was interested in was a by-product of wealth. Under such conditions the monarch might set up all sorts of monopolies and charge for them exorbitantly. But in the end, this would only decrease the wealth of the community. We have the political power endeavoring to extract, as far as it could, what money could be got from the economic processes of the community, endeavoring to control production and commerce to bring in wealth. The physiocrat, on the other hand, was one who at least carried his analysis further. He went so far as to ask what the source of the wealth was. And, as far as he could see, it came out of the ground. It came out in the form of agriculture or in the form of the results of mining. In one way or another the soil, or what lay under it, was the source of all wealth. And it was of importance, if one wished to gather the coin itself as a symbol of wealth, that one should control the source from which that wealth came. That, at least, was an advance upon this superficial character of the mercantilist doctrine which dealt with wealth simply in terms of money and which tried to control industry and commerce so as to produce the greatest amount of money. At least the physiocrats recognized that governmental procedure which increased the produce of the community was of more importance than that which simply brought in gold and silver.
The conception which lies behind Adam Smith's An Enquiry into the Nature and Causes of the Wealth of Nations is not that of immediate sources of production of articles which become wealth, but rather the process of exchange. it is the market that lies behind the political economy of Adam Smith. And not only the market in the particular community but the world-market. The mercantilist thought of the money that could be extracted by tax-gatherers. The physiocrats thought of the soil as that out of which valuable articles which could
(190) be bought and sold arose. Adam Smith thought of wealth in connection with a market within which exchange takes place. Of course, there must be something to exchange. And this exchange must be profitable. The assumption of the mercantilists, and the physiocrats, too, for that matter, had been that every bargain was a battle of wits, that somebody was victorious and someone else was defeated; that the nature of a bargain was that between horse-traders. Someone got the best of the bargain and got the better of his opponent. Adam Smith looked further than that. He said a bargain, to be worth while, ought to be good for both parties. He presented a picture of communities that produced more than they could use, and, in so far as they did produce more, they took the surplus into the world and traded it for the surpluses of other nations. They took their own surpluses, articles not valuable' at home, into the world-market where persons wanted them and where they bought up this surplus, the articles over and above those which were wanted in their own homes. Persons came together under those conditions who could both profitably carry out a bargain. One has something that he has produced beyond his own demand; another has something which he has produced beyond his demand. They want to make an exchange. After this is accomplished, both are better off. That conception is what lay at the bottom of the political economy of Adam Smith. It makes all sorts of assumptions, of course, but it is a step beyond mere production with reference to a fixed community such as the guild. It is a step beyond the political economy that simply looks to returns in the form of dollars and cents. It is also a step beyond the doctrine of the physiocrats that simply looked to the general source of wealth in a community. It came back to the actual demand as it appears in the market -- a demand which implies production beyond the demand of the community that produces, and a production that is brought to the central market directly or indirectly, to be exchanged with the surplus of another community. Adam Smith brought out this conception with its various implications in An Enquiry into the Nature and Causes of the Wealth of Nations.
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What was back of this conception was the possibility of production on a large scale. In order to make profitable the sort of bargaining that Smith presented, one must produce something which one does not want in order that it may be exchanged for something that someone else produces that one does want; and one must produce in wholesale fashion, beyond one's own demand. This led to the establishment of the factory. And when you have the factory, when persons can begin producing for a market which goes beyond the needs of a single community, the demand then comes for a division of labor. One man can do one thing more rapidly than he can do several things. An artisan carries his article through from the raw material to the finished product. He cannot do all the necessary things as rapidly as a man could carry out a single process. Divide a process up into its various steps and then you get production at a greater rate. Of course, as you subdivide the process, you invite the machine. And, with the coming of the demand for the machine, there comes the stimulus to the inventor. You may have a complicated process, such as that of making an entire shoe, which, of course, it is not possible to do with the machine, at least not at first; but if you can make the process simple, the sewing of simple seams and so on, the machine can perhaps do it better than man and does not tire as easily. The stimulus to the production of machinery, then, comes with the demand for production on a large scale, from the breaking-up of the process into simple parts which a machine can do rapidly and better than a man. First of all, one must have the means and such a market as that which Adam Smith contemplated, where the surplus of one community could be brought into exchange against the surpluses of other communities; one must have the factory in which production can take place on a large scale. When you have these, there is a constant demand for apparatus which will accomplish what man cannot accomplish. One must have division of labor. One must divide a single process up into a set of processes which can be brought within the range of the machine process. That is what lies back of the problem of production.
(192) Back of the whole thing lies the market, the economic situation with the gradual building-up of a mechanism for it, with the possible developments of the independent organizations such as lie in the very genius of our Western institutions, and with the building-up of all the financial apparatus lying behind the freeing of capital. That process which is traced back to, which is summed up in, what we call the Industrial Revolution, is of interest. But the final conception-perhaps not final, but that which has been of dominant interest until recent days-is that of the market which makes possible the exchange of surpluses.
Thus we get a conception of wealth which makes possible a world-economy process. We can see how the devout economist of this period, such as John Bright, could be a pacifist who could look toward the development of free trade and to the elimination of warfare because he had behind him a community which took in all warring nations and whose activity was one which meant production and not destruction. It is possible, of course, to turn even such political economy over to hostile purposes, but the first conception of it was of the development of a peaceful economic process in which there would be a continued development of wealth throughout the whole, that is, the international economic community. As I have said, in this conception of the market in which one trades what one does not want with someone else who brings in what he does not want, each wants what the other does not want, and ideally each party profits in the exchange.
That conception of the bargain and that stimulus to production were on a large scale; and out of that the factory, the division of labor, the demand for apparatus, machinery, to produce on a large scale, all arose. And back of that lies the demand for power. You cannot drive machinery with hand power, and so we find a growing demand for steam. That is the way in which the matter ought to lie in our minds. You cannot think of the economic revolution as having arisen out of the production of steam. If you do that, you take the very last element of the process and set it up as the first. To deal with this process,
(193) you have to go back to the type of community, to the development of the market, and then to the development of apparatus.
In our discussion of the Industrial Revolution we have treated the two theories which were used in the interpretation of it. That of the orthodox Manchester school, whose three important figures were Adam Smith, Ricardo, and Malthus, was a social philosophy, especially as developed by the Mills, who interpreted the economic doctrine of these men and undertook to make a social philosophy, a utilitarian philosophy, of it. The doctrine was one which undertook to deal with the economic processes from the point of view of the market, the determination of prices by the market in which the producers exchanged their surpluses with each other and thus established the prices of goods in more or less universal world markets, and found in these prices the stimulus for production. The process was one which led to the factory system, the intensive production of those goods whose prices stimulated this production. Thus we have a situation of supply and demand; and perhaps in the end the demand is more important than the supply, because the supply springs up in response to the demand. As there is a demand, the different means of production arise. Especially in the invention of machinery this demand brings the production of machines by means of which to answer this demand. This implies a social process going on in a community in which the need of the community stimulates production, and the determination of the prices is a way of registering this need.
The process of production is one that calls for a reduction in expense, because what one is seeking, of course, is profit over and above the cost of production, and prices you can get in the market determine this profit. Successful production is that which leave.,; a margin, which will permit the accumulation of wealth. The two phases of the process are the cost of production, on the one side, and the price which can be obtained for the article, on the other. The economic process is one determined by the relation of supply and demand in the market so adjusted that profit results to the producer. Well
(194) now, if any producer can bring down the cost of production, his profit will be greater and the accumulation of wealth greater; and then he can produce on a larger scale. So he tries to get down the cost of production in all sorts of ways. If there is a surplus of the means of production, of course, the price of these means will go down. If there is plenty of ore, of coal, of raw material, the price of the metal, of the coal, of the material, will go down. One of the very large elements in the cost of production is labor; and, of course, if there is a surplus of labor, the price of labor will go down. What the producer seeks as far as he can is a surplus of those articles which he is to use in his production, for there lies the possibility of getting a lower cost and hence a larger profit. Inevitably, the producer must seek to reduce his cost of production. The cost of production will depend, of course, on the surplus of the article. If there is a surplus over and above the demand, then the price of that commodity will drop. All this applies just as logically to labor as to anything else.
It is here that the Malthusian doctrine comes in. What Malthus thought he had discovered was that population always increased at a greater rate than the means of sustenance. In any community the increase in population will be greater than the increase in food supply. I noted the fact that sometime about the middle of the eighteenth century there was a notable increase in population in England and Europe, presumably because of a decrease in the death-rate. Malthus did not take into account the relationship of the death-rate to the birth-rate. However, he gathered figures which, as far as they went, seemed to support his contention that the population, itself, by and large, would always be greater than the supply of food and that there must be a continual holding-down of the population by the process of starvation. More children are born into the world and more survive than can continue to survive with the food supply available. Taken in terms of the birth-rate, the latter will always be too large in proportion to the food supply.
Well, this offers to the manufacturer, to the producer, just
(195) the situation he wants, that is, a surplus of labor, one of the main items in the cost of production. If you can get a surplus of coal, iron, anything that enters into the cost, then the price of that will sink and will reduce the price of production. Of course, in the same fashion, if there are more laborers than there are jobs, the price of the laborer will sink proportionately. What Malthus' doctrine implied was a surplus of labor which would keep the price of labor at the level of a starvation wage, for, after all, that would be the limit to which the price of labor could sink. Otherwise the laborer would starve to death. If there is a surplus of labor in the market, people would continue to work under those conditions as well as they could, getting just enough to keep alive. A starvation wage would be the limit below which the price of labor could not sink, and the limit toward which a Malthusian doctrine would inevitably carry it.
Here we have, then, the essential element of this doctrine, which, you see, is more than an economic doctrine. It is a theory of society in so far as society is bound to a method of production which is constantly stimulated by demand. The means of production, that is wealth, arise in proportion as there is a difference between the cost of production and the prices of the articles produced. If it costs you less to produce an article than the price at which you sell it, you have accumulated wealth; and then you can go on with the process of production. There will be a constant tendency, then, to bring the price and the cost of production closer and closer together. All the means by which the cost of production can be reduced will serve to bring about profit.
Freedom of exchange is that which will establish the worldmarket, in which the prices of things will be definitely determined. If there is freedom for exchange, we will have, presumably, the most helpful economic situation, for then those articles will be produced which are least expensive. Consequently, the price of them can be brought down until it is a price in which capital, as such, tends to pass into the hands of those who can most intelligently utilize it. The price is being continually
(196) forced down by a free market. The cost of production must be brought down if a profit is to be made possible. It is in a large concern, where manufacturing is on a wholesale basis, where the factory system can be carried through to its logical conclusion, where division of labor can take place to the limit, that you get the lowest cost of production. As I have said, one of the very large elements of the cost of production is the price of labor. And, according to the Malthusian doctrine, this will continually gravitate toward a starvation level. This is not a cheerful view for society. It leads to that capitalistic class into whose hands the capital itself will naturally gravitate, for they are the ones who can most successfully utilize it in production. The latter has to be carried on on a large scale, with expert managers and engineers; and investments have to be made in an expert fashion if capital is to be successfully utilized. The tendency will be, then, for capital to gravitate into the hands of those who can invest it most successfully, and then it remains in the hands of those who can most successfully utilize it in production by constantly keeping the cost of production down to its lowest level. The so-called "Iron laws" of nature, as exhibited in economic conditions, then, seem to lead toward a picture of the community in which its capitalistic class would inevitably gain more and more of the wealth while the rest of the community would get closer and closer to a starvation wage, which is rendered inevitable by the natural law which Malthus is supposed to have discovered, namely, that reproduction in the community will always be greater than the food supply.
It is interesting that Darwin's theory of the survival of the fittest came to him from reading the brochures of Malthus. The latter's statement quite agreed with what the former had seen in nature, namely, that among both plants and animals there is always a larger number of young forms arising than can survive. Something that inevitably follows, and about which Darwin asked himself, was whether in the competition of these young forms for a living there could be found any force which would select particular forms rather than others; and
(197) the idea of the survival of the fittest occurred to him. He himself has related how this took place. It is one of the most fruitful and important ideas that has come to man, and it occurred to Darwin through his reading of Malthus' doctrine. Of course, Malthus did not present him with the idea, but with a situation out of which the idea could spring. If there is such a competition of young forms, then, presumably only those forms will survive which are particularly adapted to the environment in which they find themselves. If, as some biologists have computed, there is a death-rate of 99.9 per cent among cutworms, you can see that those that survive will be particularly adapted to the surroundings in which they live. There is an enormous overproduction, with the consequent survival of a relatively few.
That is the situation that this economic doctrine presented; and it is interesting to see how one passes from a highly optimistic view of human nature and society, as Adam Smith presented it, to a very sorry view which logically follows the working-out of his view by Ricardo and the addition of the Malthusian theory in regard to population. As we have seen, Adam Smith recognized a community in which a bargain of intellects was always a good bargain and demanded that the hands of government, in the form of restrictions on trade, should be taken off so that such good bargains might take place. It was a doctrine directed against governmental interference, against monopolies, against the international life of the time, at least as that existed in the form of actual and potential wars. Free production on every side would bring people together under conditions in which they could presumably most profitably exchange their goods, enabling those who could produce surpluses of one sort to exchange them elsewhere for surpluses of another sort. In order to reach this desirable result, all you had to do was to let trade and the economic process alone. Do not interfere with it. Do not allow monopolies to arise. Let people produce under those conditions in which they can most successfully do so, and these will be most favorable to trade and society itself.
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Now, carry out the doctrine of Adam Smith with its intense production, figure in the cost of capital, and bring these two sides of the shears together- on the one hand the cost of production, on the other hand the price which will be continually going down with resultant curtailment of profit - and then add to that Malthus' doctrine which provides society with a surplus of population that has to be kept down continually by starvation, and the capitalistic picture so optimistic from Adam Smith's point of view becomes very dark.
