Front Page Titles (by Subject) 1: The Importance of the Nineteenth Century - Economic Liberalism, vol. 2 The Classical View
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1: The Importance of the Nineteenth Century - William Dyer Grampp, Economic Liberalism, vol. 2 The Classical View 
Economic Liberalism (New York: Random House, 1965). vol. 2 The Classical View.
Part of: Economic Liberalism, 2 vols.
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The Importance of the Nineteenth Century
The century was important for a number of reasons: (1) The intellectual authority of economic liberalism was greater than at any other time. (2) Nevertheless its principles were not well understood, were not even clear, and were a matter for dispute among the liberals themselves as well as for their opponents. (3) Its political authority was however immense. (4) The first effort to make a comprehensive statement of its principles was in 1848. (5) There was substantial opposition to economic liberalism throughout the century. (6) The doctrine and its practice had to contend with difficult economic problems.
1. The ideas of economic liberalism, which had been gathering force for centuries, came to their full power in the nineteenth century. They informed the statements about policy made by the orthodox (classical) economists and they were the power with which dissent from orthodoxy had to reckon. No one could write or speak about policy without acknowledging the power. How it influenced the writings of the economists is explained in this chapter. But its influence went much beyond them and extended to the social philosophers, the literary people, the opponents of classical economics, the journalists, pamphleteers, politicians, mass leaders, agitators, and others. Liberalism had many different meanings to these people. But one generalization can be made. To almost all who believed in it and to some who did not, liberalism did not mean laisser faire—that is, it did not mean a policy of nonintervention by the government and of allowing the major economic decisions to be made on unregulated markets. The rejection of laisser faire was one of the few ideas on which there was nearly complete agreement among the economists and between them and the political leaders.
2. About other ideas there was much less agreement. They were moreover unclear and incomplete, especially in the first half of the century. While there was agreement that a state had the right, in liberal doctrine, to intervene in the economy, there was no agreement about what the purposes of intervention should be, about how much was permissible, and what methods could be used. The reason for the disagreement was the unsettled condition of the ideas of policy. Although the classical economists are reputed to have been champions of the free market, they really did not have ideas about policy that were comprehensive enough to make them champions of anything, at least until 1848 (and it may be argued not even then). It is not often noticed that the first comprehensive statement of classical economic policy—or the first effort to make a statement—came only in 1848, almost a century after Hume brought classicism into being (and more than a century if one dates its origin earlier). Smith, Bentham, James Mill, Ricardo, M’Culloch, Senior, and Torrens are the great in the register of the classical school, which, in the popular view, was directed by a faith in laisser faire. But none in fact declared himself for it. What is more interesting is that none of them wrote about policy in a systematic way—that is, in a way that would make clear to their readers just what liberalism stood for, that would be helpful to the public in appraising measures of policy and to legislators in enacting them, or that would enable their followers to bring together their discursive remarks into a synthetic statement. John Stuart Mill was the first to do this—to enunciate a theory of policy—and he did it in his Principles, which was published in 1848. That was two years after Great Britain had taken one of the last steps toward free foreign trade, by repealing the Corn Laws. Mill was not enthusiastic about their repeal, although he was strongly in favor of the very last step, the repeal of the Navigation Acts in 1854.
3. Even though their ideas of policy were not complete or clear, the economists had great influence on the political figures of the period and through them on the public at large. Burke had said of his time that it was the age of the economists, but the nineteenth century was more truly so, from Waterloo to the last government of Gladstone in 1894. There never was a time when the public was on more familiar terms with economics, when opinion was as much under its influence, and when governments were more respectful of its “laws.” Economists were listened to for their political economy—for the purposes of their policy and not only its means. They were not expert advisers or skilled technicians; they were political men. Thomas Tooke was known as the schoolmaster of the House of Commons, and a schoolmaster in the nineteenth century was a man of parts. A prime minister called John Mill the Saint of Rationalism. There were economists in Parliament and cabinets, and economists were called on by Select Committees for their opinion on political goals as well as on the economic means for attaining them. Whether called on or not, they usually expressed their opinions. Also noteworthy is the fact that the leading economists took part in the greatest political movement of the century—the reform of Parliament and the extension of the franchise. The literate world today unfortunately knows little about the political causes with which the economists were associated. They denounced the restriction of civil liberties following the Napoleonic Wars, demanded the right of all to freedom of speech and assembly, insisted that workers should be free to form unions and other voluntary associations, saw world peace as a consequence of free trade, opposed slavery and spoke out against Britain’s intervening on behalf of the South in the American Civil War, and worked steadily to extend the right to vote and to make the House of Commons a completely representative body. If these things were known, there would be less inclination among those outside economics to think of it, if at all, as an apologetic, dull and incomprehensible, and less inclination to show surprise on finding something humane and literate in a work about the subject. And there also might be less inclination for economists to respond to the misconception by pursuing their elegant isolation.
4. Once Mill had stated his theory of policy, he made possible a modification of liberalism that was to have important results. He tried to put together two sets of ideas—one came from the classic liberalism of the seventeenth century and directed policy toward increasing the freedom of the individual and protecting his rights; the other came from utilitarianism and directed policy toward improving the individual. Classical economics had harbored both sets of ideas for nearly a century. They had not gotten in each other’s way, because no one had tried to define the place of each. Mill tried to make policy serve both freedom and improvement, but in the end he made the latter, the utilitarian objective, the more important. It justifies forms of intervention that cannot be justified by classic liberalism. The latter was not opposed to intervention per se, but to its being decided independently of the popular will. After Mill made his statement, the liberal tradition was more noticeably divided into two parts: one part continuing the early and classic ideas of liberalism, and the other enlarging upon his ideas, although often unaware of their origin. Utilitarianism led to a policy of extensive government direction, always in the name of liberalism. Both the policy and its name have pained those who remain in the classic tradition, or in what they believe it to be. Who are the genuine liberals? The question is not, Who better represents liberalism?, because liberalism has two distinct components. It really is a question of who is entitled to the name. By antiquity, those in the classic tradition are, because their ideas are somewhat older. The more important question is whose objectives are preferable? That became the issue in the nineteenth century (and remains the issue today).
5. During the century there was substantial opposition to economic liberalism. The opposition was an acknowledgment of its power. In the first half of the century, the target was Ricardian economics, “that canker of states,” as one critic called it. The opponents were many of them uninformed, unreasoning, and anachronistic. They were not simply against Ricardo’s economics, which few of them understood well enough to criticize. They were opposed to the world it was meant to explain and direct. They were opposed to industrialism and technological change, in their entirety and in each of their aspects, as the M. P. was who said it could not matter less to the nation that the building of railroads would reduce the time needed to transport goods. They were personally offended by the doctrine of overpopulation. Malthus was a bête noir. They not only condemned his doctrine but managed somehow to hold him responsible for the danger it described. When they were bold enough to declare what kind of a world they did want (which Burke was too canny to do), it was a mythical, merry, and rather foolish England. Who were these critics? For the most part their names are unremembered. One finds their attitude among the memoirs of the period, in the Parliamentary debates, in the newspapers, and in the novels. Cobbett sometimes expressed it, and even Disraeli. Despite their anonymity, they deserve notice. They expressed an attitude that is appealing, enduring, and consequential. It is an attitude of anticapitalism and, more basically, one that expresses opposition to individualism. It is found in the twentieth century as well as in the nineteenth, in such diverse figures as D. H. Lawrence, Ezra Pound, and Colin Wilson.
Many of the attitudes were stated in cogent form by Carlyle and Ruskin, and later by an impressive number of writers and artists, among them William Morris, the Pre-Raphaelites, and at times, Matthew Arnold. They were political idealists and hence rejected the first premise of liberalism, which is the right and the ability of the individual to make choices. They made articulate the opposition of the anonymous critics, and although the ideas were no less atavistic they were stated in a more influential way. The attack on liberalism, made by Carlyle, Ruskin and others like them, was more consequential, it can be argued, than that of any other group, more even than that of the Marxists, who in any event came later.
The working-class opposition to liberalism came from a different source and it too was earlier than Marxism. It came first from Robert Owen and the utopian beliefs of those associated with him. Their doctrine was slight, but it had great practical effect, notably in the field of cooperatives. Moreover, some of Owen’s ideas stung the Ricardians. To read only about how the Ricardians felt toward the doctrine of Owen is to get the impression of something quite absurd. It was not that at all. Shortly after Owen began propagating his ideas there developed a socialist version of Ricardian economics, expressed by writers like Piercy Ravenstone and Thomas Hodgskin. They drew what seems to be the obvious ethical conclusion from Ricardo’s theory of value: If labor produces whatever value a commodity has, the commodity clearly belongs to labor. It is interesting that no one seems to have asked why those who produce wealth are entitled to it. Had the question been raised it probably would have been thought foolish. Yet it is not. If those who produce wealth are entitled to it, then those who do not produce are entitled to nothing. If the latter rule had been practiced, a good part of the population would have perished because it consisted of people who owned nothing that produced wealth (children, the aged, the infirm, the indigent, and women). Actually the ethical judgment that was read from the labor theory of value was a judgment that goes far back into history, back beyond Locke and Hobbes to the Old Testament, Genesis, and the idea of original sin—that our bread is the reward of our labor and our labor is the punishment for our disobedience.
There were still others who were opposed to liberalism or to some aspects of it. They were the middle-class and working-class radicals who were not socialists, not atavistic, and not political idealists. They had few ideas of economic policy, but they had a great many policies. The particular object of their opposition was Ricardian economics in certain of its features. They objected to its not recognizing altruism where altruism was a fact; they objected when the Ricardians proposed laisser faire for some markets and they objected when it was not proposed for others. They were not in favor of completely free labor markets and were one of the principal forces in support of the Factory Acts. But in international trade they wanted laisser faire established completely and immediately and they would have none of the qualifications to free trade that the Ricardians accepted. Their opposition was much different from that which others expressed toward Ricardian economics. The radical opposition was qualified, good-tempered, and friendly at heart. The ideas on which it acted were liberal ideas. But the radicals were not principally men of ideas at all. They were campaigners, agitators, propagandists, activists. They were also impatient. When Ricardian doctrine counseled them to be moderate, watchful, and patient—they swept it aside.
6. Liberalism had to contend with quite serious economic problems as well as with doctrinal opposition. The depression of 1819 initiated a cyclical movement that has continued ever since and is unlike the irregular and spasmodic fluctuations prior to the nineteenth century. There were severe depressions in the 1840s, 1870s, and 1890s. Early in its history the cycle acquired an international aspect. In the 1830s, the deflationary measures of President Jackson were one cause of the contraction in Britain—probably the first instance of the exporting of unemployment by the United States. Monopolies were another problem. Before the nineteenth century most of them originated in the grant of exclusive rights by the state. Now they originated in the market, and the classical remedy for them was thereby weakened. The remedy had been, particularly in Smith, to abolish government protection of firms and to allow the market to force them to be competitive. Now it was the harshness of competition itself that was a cause of monopoly.
Still another problem was the growing, or apparently growing, inequality of wealth and income. One aspect was the squalor and brutality of the factory towns, and another was the conditions of work in the factories. Actually the average real income of factory workers and their families was almost certainly higher than that of agricultural laborers. There is other evidence that the industrial growth of the century produced more than the wretchedness for which it is notorious. But squalor and brutality were easily seen and readily imputed to the market. The problem was in fact more complex. One of its causes is the inability of a free market to include in the cost of producing manufactured goods all the incidental effects that manufacturing produces, or, in technical language, the inability of a market always to account for social as well as private cost.
Even if the market had been able to reckon all costs there would have remained another problem. It was the most serious of all. It was the quality of the civilization that capitalism was creating. Men still believed that individual economic conduct contributed to the building of character, but after the middle of the century they began to think there were aspects of character that it neglected. Economic individualism certainly is favorable to the development of self-reliance, diligence, reliability, prudence, a respect for facts, and a form of courage that, however rough and simple, is admirable. But individualism also directs one’s attention to values that are measurable in money and away from those that are not. Usually those that are not measurable in money are those that matter more: those that are in the arts, in imaginative literature, in the search for knowledge as a thing in itself, that are in the feelings people have for each other and in their sense of what is happy and fitting. They are values that are hard to describe, still harder to communicate, and nearly impossible to appraise. They are not ideas about which demonstrable propositions can be made, as they can be made about many of the ideas in economics. But they are what most men always have thought to be important, and only the foolish or the boorish have turned away from them. This is the problem—the problem of noneconomic values—that brought Carlyle and Ruskin to economics. It made Ruskin deny the premise from which Mill had begun his Principles. Mill had said, innocently, that wealth consists of those things measurable in money. “There is no wealth but life,” Ruskin thundered (as or nearly as he could in the prose he wrote) and in time he was listened to.1 This problem has not much interested the Marxists—the other great opponents of liberalism—although they have alluded to it. With the benefit of hindsight, one can see that Marxism was as prosaic in its origins as Ricardian economics was and in practice has turned out to be more materialistic.
For these reasons the nineteenth century was important in the history of economic liberalism, and I wish to bring these studies to a conclusion by describing that period. The information is drawn from what was written and done in Great Britain, because liberalism was more important there than it was in any other country. Other countries had some experience with it, but not in so significant a way. In fact when the nineteenth century is recalled as the age of the free market, Great Britain, and very little more, is what is remembered. That little is curious: the tariff reforms of the autocratic Napoleon III, the free-trade proposals of the slave owners in the United States, and the enthusiasm for laisser faire in the court of Tsar Alexander. Laisser faire has made some disreputable friends and to its embarrassment continues to do so.
In this chapter I wish specifically: (1) To state the principal measures of policy enacted in Britain to about 1860. They help to explain the writing on policy, some of which was about particular enactments, and they show the influence of that writing. By 1860 the direction of government action was clear and was fixed on a course that did not change in any important way until after World War I. (2) To describe the ideas of policy put forward by the economists, the ways in which the ideas were ambiguous and needed to be clarified, and the effort of John Stuart Mill to make a comprehensive statement of the principles of liberal economic policy. (3) To offer a principle that seems to me to reconcile the diverse and apparently contradictory elements of liberal policy both in its ideological and its factual aspects—a principle that integrates both the ideas of the economists and the enactments of the state. I propose a new principle because the usual principles do not seem to be as explanatory.
 John Ruskin, “Unto This Last,” Four Essays on the First Principles of Political Economy, Works (New York, 1883), IX, 125.