This section is from the "Elementary Principles of Economics" book, by Richard T. Ely and George Ray Wicker. Also available from Amazon: Elementary Principles Of Economics: Together With A Short Sketch Of Economic History
Economic Conditions in 1760. It was in England that the change from the handicraft stage to the industrial stage first began and was most rapidly accomplished. The change is generally called in England the Industrial Revolution, and the name is appropriate. A change which takes place so gradually that life adjusts itself to the new conditions without great loss or suffering, a change like that which occurs in the plant that is always growing, yet seems to be at a standstill, such a change we call a development or evolution. But a change which comes so rapidly that life cannot promptly adjust itself to the new conditions, a change that breaks down the old order with much confusion and suffering, this we call a revolution.
To understand the English Industrial Revolution aright, we must first go back to study the condition of things just before it began.
1. Agriculture. In 1760 immense tracts of English land were still held as " common " land. Seven million acres of such land were made private property between 1760 and 1843. Upon this common land laborers built their cottages, cultivating little patches of it for themselves, and pasturing upon the rest of it the few geese or sheep that they were able to keep. The advantage was that the laborers were somewhat independent, paying no rent, and having some slight means of support besides their wages. The great disadvantage was that most of the land was so poorly utilized that it was well called " waste " land. What was every one's business was in that case, as generally, no one's business. The marshes were undrained, and what little cultivation was practised was primitive and poor, and therefore wasteful in the extreme. 2. Manufactures. But it was in the department of manufactures that the greatest change was to occur. The system of hand manufactures was still general. When Adam Smith, in his Wealth of Nations, published in 1776, wrote, "A man grows rich by employing a multitude of manufacturers," he was using the word manufacturers in its then usual sense, to denote artisans or mechanics. The principal manufactures were woollen goods, which England exported in 1770 to the value of about X4,000,000, that being nearly a third of her total export trade. The methods of manufacture were primitive. In the textile industry, for instance, the "manufacturer" had his home, his cows, his horse, and his poultry; he bought his wool, his wife spun it into yarn, and together they wove it and sold it at the "fair," enjoying all the proceeds. As the spinning on the old spinning-wheel was done one thread at a time, it followed that a weaver with a hand-loom could work up the yarn more rapidly than it could be spun. Even before 1760, however, a change had already begun. Cities began to attract the hand-workers. The inevitable tendency to divide the processes of manufacture showed itself. The workers found it difficult to attend to the buying of the wool, the spinning, the weaving, and the selling of the finished goods. So the processes were divided, and middlemen appeared who bought yarn from the spinners and sold it to the weavers. Later they ceased to sell the yarn, but furnished it to the weavers on contract, keeping a claim upon the cloth, and paying a stipulated sum for the weaving. Thus the old "manufacturer" became a workman, a wage-earner, and in a measure dependent upon the capitalist who furnished the stock. Many of the germs of the factory system therefore existed as early as 1760, though as yet the work was generally done by hand power with very simple implements.
Next in importance to the woollen industry was that of iron; but England in 1737 imported perhaps twenty thousand tons of iron, or more than she herself produced. After 1740 the iron trade had begun to fall off because supplies of charcoal for the charcoal smelting of the time were almost exhausted. Other forms of manufacture, such as those of silk, linen, and cotton, had hardly begun.
3.Transportation. Such goods as were manufactured could be moved only with great difficulty and at great expense. Transportation facilities were very backward. One traveller of the time, who speaks of the highways as "most execrably vile," tells us that he found ruts four feet deep, and that he " saw three carts break down in a mile of road." Such being the condition of the roads, packhorses were still the common means of transporting goods to and from market. The only improvement before 1760 consisted in the building of a few canals.
4. Economic Legislation. Of all the conditions that were characteristic of the time, that of the economic legislation of the period seems most strange to the modern reader. The mediaeval notion of government was still nominally in force. In general, this notion was that detailed special legislation was required for many cases in which we of to-day regard general laws as preferable. Thus the State passed many laws to regulate religion, agriculture, manufactures, and commerce. Some of these laws require our special attention at this point. We have already remarked upon the fact that men of the earlier days did not believe in competition. They dreaded the mischief a stranger might work, coming into a town and carrying on trade in an irregular fashion. So they passed in England a law known as the Statute of Settlements, which prescribed that no man could carry on a trade unless he was a citizen of the city and a member of the trade gild there. It also provided that a workman coming into town must, upon the demand of any citizen made within forty days of his coming, give evidence or surety guaranteeing the town for one year against his becoming a charge upon the taxes for the relief of the poor. Since few could furnish such a guarantee, the law was a very serious obstacle to freedom of movement. By another law it was prescribed that one could become a member of a trade gild only after seven years of apprenticeship, and only in a specially prescribed manner. Moreover, there were other regulations limiting the number of apprentices. The purpose of such regulations was to protect the various trades from overcrowding and from irregular methods. It must be remembered that at the time when such regulations grew up competition in the modern sense was an impossibility, and nothing but such customary or legal restrictions could avail to guard the true interests of the individual and society.
Wages. Perhaps the most striking of all the economic legislation of the time was the law which left to Justices of the Peace the work of fixing the wages of workmen. In explanation of the law it was often held that workmen would be oppressed if left to the mercy of employers; but the real purpose of the law seems rather to have been to protect the employer against high wages, and the spirit of the administration of the law seems to have conformed to that purpose. Inasmuch as the workmen were thus " protected " by law in the matter of their wages, combinations among them were held unnecessary and dangerous, and were therefore strictly forbidden.
5. The Condition of Thought in 1760. We should fail to understand the Industrial Revolution were we to confine our attention to the economic life. In 1760 there had recently begun a tremendous revolt against the whole system of legislation and government that we have described. But it would be a mistake to suppose that this revolt, which eventually carried everything before it, showed itself only in the field of industry. Indeed, the restrictions which aroused the greatest opposition were those upon conscience and religious worship. Next to religious liberty political liberty was the desire of all Englishmen. While restrictions upon trade were accepted without vigorous protest, the passion for personal liberty worked itself up to a fanaticism.
Under the influence of this spirit of protest, Adam Smith wrote, and in 1776 published, his Wealth of Nations, the most influential book on economics that has ever been written. Men so runs his argument are by nature free and equal. Inequalities are of man's making, and are to be avoided. Leave men alone and equality will reassert itself. What men need in their business is not protection but liberty. Under a system of free competition each man will seek his own interest, and, in seeking his own interest, will promote, as a rule, the best interests of society as well. If the result is not the best that is ideally conceivable, it is at least the best that is practically possible, and is certainly better, thought Smith, than can result from any interference of government.
Such was the temper of the age; so universal was the impatience with restraint, even the most wholesome; and so mischievous and shackling was much of the existing economic legislation, that the Wealth of Nations was soon elevated to the rank of an economic gospel, and, followed as it was by other great works of similar character, it inspired the economic policy of the greater part of the nineteenth century. We shall note later the results of the adoption of that policy.