Economic thought in the early nineteenth century was dominated by Adam Smith’s quintessential treatise the Wealth of Nations which centered around the concept of Laissez-Faire Economics, in which the government supports an economic environment in which transactions between private parties are free from tariffs and government interference, with only enough government regulations sufficient to protect property rights against theft and aggression.
Laissez-faire or Classical Economics thought of society consisting of individuals whose competitive efforts met consumers’ demands in the marketplace which was the governor of most economic decisions. They further saw the state protecting the free market with its military and naval strength; they saw a marketplace built on thrift, competition and personal industry and that appealed to the middle class.
Thomas Malthus and David Ricardo
Early nineteenth century economics was further shaped by Thomas Malthus (1766-1834) and David Ricardo (1772-1823). In 1798, Malthus published his Essay on the Principle of Population whose ideas have haunted human beings ever since. He said the population must eventually surpass the food supply; that the food supply grows arithmetically but population grows geometrically. The only hope of diverting disaster, according to Malthus, was through late marriage, chastity and contraception. [As an Anglican priest, he considered the last of these a vice.]
Malthus concluded that the plight of the working poor could only become worse. If wages were raised, workers would respond by having more children who would, in turn, consume both the extra wages and more food. In his later years, Malthus was more positive and suggested that, if the working class could be persuaded to adopt a higher standard of living, their increased wages might be spent on consumer goods, rather than begetting more children.
In 1817, David Ricardo published his Principles of Political Economy which transformed the ideas of Malthus into the Iron Law of Wages. The law works like this. If wages are raised, parents will have more children. The children in turn will enter the labor market expanding the number of workers and lowering wages. As wages fall, however, working people will produce fewer children. Wages will then rise, and the process would start all over again. Consequently in the long run, wages would remain low. Therefore it was pointless for employers to raise wages and provided a strong argument against labor unions.
Needless to say, the working class people resented these ideas but the French and British governments welcomed them. King Louis Philippe (r. 1830-1848) of France and his Prime Minister François Guizot told the French people to go forth and enrich themselves. People who worked hard did not need to be poor and more and more of the French middle class did just that. Louis Philippe’s reign (the July Monarchy) saw major construction projects such as railways, roads and canals. But little was done about the poverty in the city and the countryside.
In Germany, the middle class made less headway. After the Napoleonic wars, the Prussian reformers saw the advantages of abolishing internal tariffs and trade barriers that made economic growth difficult. In 1834, all the major German states except Austria formed a free trading union called the Zollverein.
Great Britain was the home of Classical Economists and such policies were well received by entrepreneurs and the government. The utilitarian thought of Jeremy Bentham (1748-1831) increased their influence. Bentham sought to create codes of scientific laws – founded on the Principle of Utility, that is laws that create the greatest happiness for the greatest number of people – and in two works, Fragment on Government (1776) and The Principal Examples of Morals and Legislation, he explained that the application of the principle of utility would overcome the special interests of privileged groups who prevented rational government.
Bentham regarded the existing legal and judicial systems as burdened by traditional practices that harmed the very people the law should serve. Not only could the principle of Utility create a just legal system, it could also be applied to other areas of government administration. In 1834, his followers in the House of Commons passed a new Poor Law which established a Poor Law Commission whose purpose was to make poverty the most undesirable of all social circumstances. Government relief was to be given only to those who went to Government workhouses and life in the workhouses was designed to be more unpleasant than life outside. Spouses were separated; food was bad; the work distasteful and the social stigma the worst of all. But even though their purpose was aid those who did not want to work, the laboring classes regarded the workhouses as “Bastilles.”
Repeal of the Corn Laws
The Corn Laws were trade laws designed to protect grain producers in Great Britain and Ireland against competition from less expensive foreign imports between 1815 and 1846. The laws favored British landowners because they levied steep import duties on imported grain. That in turn reduced the amount of grain for sale in Britain which drove up both the price of grain and the landowners’ profits. The Anti-Corn Law League, founded in 1838, agitated peacefully to abolish the tariffs and allow lower wages without harming workers. The prices on British manufactured goods could also be lowered to strengthen British competitiveness in the world market. However, the most important reason that the Prime Minister, Sir Robert Peel, allowed the Corn Laws to be repealed was the Irish Potato Famine of 1845. Peel had to open British ports to foreign grain to feed the starving Irish but he also took steps to modernize British agriculture to make it more efficient.
But there were individuals who sought to ameliorate (make better) the plight of the working poor and force capitalist governments to modify Laissez-Faire principles. One of the strongest responses to Capitalism and Laissez-Faire Economics was Socialism, which arose in the first part of the 19th century when many individuals came to the conclusion that the economic system was incredibly unfair to the average worker.
They questioned whether the aristocracy or captains of industry had the right to be in control of so much power over so many people and so they became vociferous (loud) critics of the Industrialist system and they tirelessly worked to alleviate the social and economic evils caused by capitalism and industrialization. There were three kinds of Socialists: Utopian, Revolutionary and Evolutionary.
The earliest socialists were Utopian socialists. They were considered utopian because their ideas were often visionary and because they often advocated the creation of ideal working communities. They were socialists because they questioned the structures and values of the existing capitalist system.
Henri de Saint-Simon (1760-1825) was the earliest utopian socialist. As a young liberal French aristocrat, he had fought in the American Revolution and he welcomed the French Revolution even though he made and lost a fortune. By the time of Napoleon’s coming to power, he turned to a career of writing and social criticism. Saint-Simon believed that modern society required rational management and that private enterprise, wealth and property should be administered by the state, not its owners.
Saint-Simon’s ideal government would consist of a large board of directors that would coordinate the activities of individuals and groups to achieve social harmony. He was – in a sense the father of Technocracy (government in which experts in technology would be in control of all decision making), not the redistribution of wealth. By his death in 1825, Saint-Simon’s idea of management by experts alleviating poverty and social problems, had failed to win many followers. Nevertheless, Saint-Simonianism societies became centers for lively discussions and some of the earliest debates in France over Feminism including sex outside of marriage. (Several of Saint-Simon’s followers became French railway leaders during the 1850s)
Robert Owen (1771-1858): was a Welsh, self-made cotton manufacturer, who became the best known of the Utopian Socialists. Owen owned one of the largest cotton factories in Scotland at New Lanark. Owen believed that people are products of their heredity and environment and this Environmentalist psychology caused him to teach that if human beings were placed in the correct surroundings, they and their character could be improved. And more importantly, Owen saw no contradiction between creating a humane industrial environment and making a profit.
At New Lanark, Owen put his theories into practical application. Workers were provided good housing and recreation facilities abounded. Owen raised wages, gave bonuses for employees who did good work, cut working hours, kept young children out of the factory while sending them to school and operated a store that sold goods at fair prices – and his reforms actually made money.
Although most captains of industry refused to adopt his reforms, Owen nevertheless showed the world that cooperative control of industry (and educating children instead of exploiting them) was necessary to bring about a just and equitable society. Visitors flocked from all over Europe to see what Owen had accomplished through enlightened management and Owen wrote numerous pamphlets pleading for the reorganization of industry based on the New Lanark Model. During the 1820s, Owen sold New Lanark and went to the United States, where he established a community at New Harmony, Indiana. The community was established on the Cooperative Principle in which its members voluntarily cooperated for their mutual, social, economic, and cultural benefit.
Quarrels among its members, however, led to the failure of the community and one member, Josiah Warren (who later became an anarchist) asserted that the community was doomed to failure due to a lack of individual sovereignty and private property. Owen returned to Britain where he became the moving force behind the Grand National Union, which was an attempt to draw all British trade unions into a single body. Along with similar labor organizations, it collapsed in the 1830s.
Charles Fourier (1772-1837) was the French counterpart to Robert Owen. Not as well-known as Owen, he wrote prodigiously (a whole lot) hoping a patron would help him undertake his ideas. Fourier believed that industrialization had ignored the passionate (emotional; romantic) side of human nature and so he advocated the construction of communities called Phalanxes in which liberated living would replace the monotony of industrial life. His ideas were both agrarian and free thinking. He believed happy people would be more productive. Wealth was determined by one's job; jobs were assigned based on the interests and desires of the individual. Sex would be free and marriage reserved for later life and no person had to the same type of work all day. Although he never found a benefactor, his identification of boredom as a hindrance to industrial output isolated a key problem in even modern economic life.
Louis Blanc and the Organization of Labor
Saint-Simon, Owen and Fourier all hoped that governments would carry out their ideas but they failed to see that social transformation was needed for social change. But there were those who looked more to the practical and the politics of the situation. In 1839, Louis Blanc (1881-1882) published the Organization of Labor in which he demanded an end to competition. He did not seek a wholly new society but called for political reform that would give the vote to the working class. Once given the vote, workers could use the vote to gain advantages in the political process. Blanc believed that a state dominated by a working class electorate would also finance workshops to employ the poor which might even replace private enterprise. Blanc foresaw the state as a major employer of labor.
Non-Utopian Socialists usually fell into two groups: Evolutionary Socialists who placed hope in representative governments and called for the election of legislators who would support socialist reforms and Anarchists who favored terror and violent revolutionary activities. Pierre-Joseph Proudhon (1809-1869) represented the more peaceful of the anarchists.
In 1840, he wrote What is Property? In it, he attacked the banking system which was notorious for not extending credit (making loans) to small property owners or to the poor. He wanted credit expanded to allow the lower classes the opportunity to engage in economic enterprise. He believed that society should be organized on the basis of Mutualism (the system whereby small businesses and other cooperative enterprises could exchange goods and services based on mutual recognition). The state would play its role as the protector of property. Proudhon’s ideas would inspire later socialists who wanted fairness in the market place and also the French labor movement, which would become less involved in politics than the labor movements of Germany or Great Britain.
More radical were the German socialists Karl Marx (1818-1883) and Friedrich Engels (1820-1895) who scorned the Utopian Socialists as “unrealistic venturers” that offered no real solution in a brutal world. Marxism would exert more influence in the nineteenth and twentieth centuries than any other form of revolutionary socialism. Karl Marx was born in Trier, Germany in the Prussian Rhineland. His family was Jewish but his father had converted to Lutheranism.
He graduated from the University of Berlin where he joined the Young Hegelians a group deeply involved in the ambiguous (confusing) philosophy of George Friedrich Hegel. Marx became immersed in radical politics and in 1842 edited the radical Rhineland Gazette. Soon Prussian authorities drove him out of Germany into exile. He first lived in Paris, then Brussels and finally after 1849 in London.
Friedrich Engels was born in Barmen, Prussia (now Westphalia) and was the eldest son of a wealthy German cotton manufacturer. At seventeen he dropped out of high school, joined the Prussian army which took him to Berlin where he attended lectures of the Young Hegelians. In 1842, he was sent by his parents to Manchester England to work in their factory which made thread. On the way, he stopped in Paris and first met Marx. Two years later, the two again met and became friends. Then Engels published The Condition of the Working Class in England, which was a devastating attack on the conditions of the working poor in England. This book sealed their friendship. In 1847, they were asked to write a pamphlet for a newly organized secret (and ultimately short lived) Communist League.
The result was The Communist Manifesto which was published in 1848. The name communist was chosen by Marx, Engels and the league because it had more radical implications that the more innocent sounding socialism. Communism comes from the French “commun” which means “common” (which we will see used similarly in the next chapter with the Paris Commune of 1871) and it implied the complete abolition of private property rather than the Utopian or Evolutionary socialists’ more conservative approaches. Despite its enormous influence, The Communist Manifesto is a short work of just under fifty pages and for many years, it was just another radical-socialist pamphlet. Contrary to popular belief The Communist Manifesto was an analytical approach to the class struggle (historical and present) and the shortcomings (failures) of capitalism, rather than a prediction of what communism might do for society and the working class. Moreover, the Manifesto would not have much - if any - impact on the Revolutions of 1848.
Marx and Engels had both been influenced by British Classical Economics, French Utopian Socialism and the Young Hegelians. Marx, who came to be an astute student of history and economics, made Hegel’s abstract philosophical concepts of thesis and antithesis into a new intellectual synthesis. For Marx, the conflict that arose between dominate and repressed social groups (which he called the haves and the have-nots) would led to the formation of a new dominate social group. The haves were the capitalists (The Industrial Bourgeoisie) who owned industrial machinery and factories and the have-nots were the Proletariat, or the wageworkers who had only their labor to sell. They taught that the intense competition engendered by capitalism led to ruthless exploitation of the working class.
Marx created a way of thinking that gave a special role or function to the new industrial work-force as the single most important driving force of modern or industrial age history.
Thus, in The Communist Manifesto, Marx compared the fate of the Proletariat with the fate of humanity itself; in other words, when the Proletariat liberated itself from Capitalist servitude (slavery), all of humanity would be liberated. Even culture as expressed in art, education and music benefited the capitalists and hurt the workers because they diverted workers from their misery. Marx was also highly and bitterly critical of religion and called religion the Opiate of the Masses (opium = heroin; thus, the heroin of the masses) because it encouraged people to focus on a hypothetical future life instead of correcting the injustices of this life.
Marx asserted that all human history had been a struggle between social classes and that the future lay with the working class because the laws of history dictated that capitalism would inexorably (inevitably) grind to a halt. In 1867, He published Das Kapital which was a condemnation of the capitalist system and in which he utters his hallmark (quintessential) exhortation, Workers of the world, unite! Marx postulated that the essence of capitalism is the exploitation of the working class and that the profits created by the workers are wrongly expropriated (taken) by the employer.
Marx and Engels believed that a socialist revolution was inevitable and would result in a Dictatorship of the Proletariat, which would abolish private property and destroy the capitalist order. After the revolution, the state would wither away, coercive institutions (like the police) would disappear and a fair, just and egalitarian society would arise. Marx and Engels believed that the victory of the Proletariat over the Bourgeoisie would be the culmination (the high point) of human history when no group of people would be oppressed by another. This revolution would be the victory of humanity itself.
The ideas of Marx and Engels were a byproduct of the 1840s, a decade which had seen much human suffering and unemployment. But not all of Marx' predictions came to pass because in the latter half of the century, European and American capitalism did not collapse, the industrial system benefitted more and more people and the middle class did not become proletarianized. Nevertheless, Marxism became ingrained among many socialists because it appeared to be based on the empirical evidence of hard economic fact. Thus, the doctrines of Marx and Engels would dominate European and international socialist thought and ideas throughout the nineteenth century – and are still alive and well today!
The Revolutions of 1848
In 1848, a series a liberal and nationalistic revolutions swept across Europe. They were a stunning event; for they seemed to come from nowhere. Never in one year had Europe witnessed so many major uprisings. The French monarchy fell and other thrones were visibly shaken. German and Italian liberalism and nationalism were frustrated. The Hapsburg Empire was shaken and even Metternich had to resign and flee the country. Yet without exception, the revolutions failed to establish liberal or national states. No single factor caused the Revolutions of 1848 but among them were:
Poor harvests and food shortages with the Irish Potato Famine being simply the worst example of a continent wide problem;
Continued wide ranging recessions with high unemployment levels which caused frustration and anger especially in urban areas;
Public systems for the relief of the poor and unemployed which had become strained;
That fact that most nations had not properly addressed the terrible living conditions of the working poor in urban and industrial areas;
The continuing unhappiness of the urban, artisan and laboring classes.
But the strongest force behind the outburst of frustration that led to the Revolutions of 1848 came – not from the working classes – but from political liberals who were mostly from the middle class. These Liberals wanted more representative government, protection of civil liberties and private property and an unregulated economy.
The repeal of the English Corn Laws was an example of such peaceful agitation. Liberals on the Continent also wanted to pursue similar peaceful tactics but - to put pressure on their governments – they allied with urban workers who wanted more money and more favorable working conditions. This alliance would be a significant factor in the Revolutions of 1848.
The 1848 revolution in France was political with economic undertones but outside France nationalism played an important role in the Revolutions of 1848. Germans, Poles, Italians, Hungarians, Czechs, and other ethnic groups wanted national states that would replace what they felt was the imposition of foreign rule over them. It was in the Austrian Empire where this nationalist discontent was the strongest. Even more confusing was the fact the various national groups clashed with each other during the revolutions.
The forces of the Old Regime proved stronger than anyone had expected. Pierre Joseph Proudhon summarized popular frustration when he wrote, “We have been beaten and humiliated . . . scattered, imprisoned, disarmed and gagged. The fate of European democracy has slipped from our hands.” Yet there would be gains. Austria and Prussia (and later Russia) would abolish feudalism; the middle class across Europe would make social and economic gains; and the Habsburgs would ultimately give the Hungarians more self-determination in the Ausgleich of 1867. But most importantly, the Revolutions of 1848 were a glimmer of what could be.
France: The Second Republic
Earlier in the chapter we saw how Louis Philippe and his Prime Minister François Guizot told the French people to go forth and enrich themselves and that, although his government undertook major projects such as building railways, roads and canals, little was done about poverty and the corruption which was rampant in the government. The liberal opponents of the king organized a series of political banquets (political meetings under the guise of fund-raising banquets) at which they criticized the government and demanded the vote be given to the middle class. The terrible grain harvests of 1846 and 1847 with the consequent resulting inflation of food prices and high unemployment brought working class support for the liberals.
The February Revolution began on February 21, 1848, when the government forbade any further banquets including one scheduled for the next day. Angry workers paraded through the streets demanding Guizot’s ouster. The next morning the crowds grew larger and Guizot resigned. Then, reminiscent of 1832, the crowds erected barricades and clashed with the police. On February 24, the citizen king abdicated and fled to England to live his last days in exile. Thus ended the Orleans monarchy (1830-1848) and the foundation of the Second French Republic.
The liberal opposition was led by the poet Alphonse de Lamartine (1790-1869), who organized a provisional government. The liberals intended to elect an assembly that would write a republican constitution (a conservative document which favored the bourgeoisie and wealthy) but the working class in Paris had different ideas. They wanted a social revolution as well as a political revolution. Led by Louis Blanc (who had written Organization of Labor which demanded an end to competition in the marketplace) and two other radicals, who became ministers of the Government Labor Commission, the provisional government organized national workshops (i.e., public industries like railroads) that provided relief for the unemployed. Blanc was trying to put his economic ideas into action; he also hoped that the workshops would also generate revenue for the state.
On April 23, an election of universal male suffrage chose the new National Assembly. The result was a legislature dominated by moderates and conservatives mostly because people in the provinces were afraid of the radicalism of the Parisian working classes. Moreover, the Church was still influential and the peasants were afraid that their farms would be confiscated. The new National Assembly thus had little sympathy for the expensive national workshops which they believed were socialist in nature.
Throughout May, Paris was in turmoil as government troops tried to subdue the angry, unemployed workers. As a result, the assembly closed the workshops to new members and made plans the eject many of the enrolled members. Soon barricades again appeared. On June twenty-fourth, under orders from the government, General Louis Cavaignac (1802-1857) used troops from the conservative countryside to put down the riots. During the next two days, more than four hundred people were killed and another 3,000 were hunted down and arrested. The hope for a social revolution was over.