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
We have already explained that accompanying the change in industrial methods went a radical change in opinion as to the proper attitude of the State toward human affairs, including industrial affairs. This change was in part due to a feeling that men had really become so intelligent and reasonable and just that they would know and respect one another's rights. But the chief reason for the change was the general acceptance of Adam Smith's central doctrine that self-interest will regulate men's actions for the general good more nearly and more surely than can any statutes framed by man. We have now to study in detail some of the points in which this theory of governmental passivity has broken down under the test of experience, and some of the changes that men have found themselves compelled to make in consequence.
1. Government Inspection of Goods. In repealing the old laws for the inspection of wares, it was claimed that under the free play of self-interest in competition, cheating would not pay and would therefore cure itself. Needless to say, these hopes were never realized. Men might perhaps be safely left to pursue their own interest in buying goods if they knew enough to do so, but they do not. Indeed, it was far easier for one to assure himself of the quality of his purchases in the old days when the goods were of less variety, were more simple in their character, and were made by craftsmen who were not remote from the purchaser. But who in our day can tell the quality of baking-powder, of ground spices, or of a thousand and one things that are subject to adulteration ? How many can distinguish butter from oleomargarine ? How many can detect fever germs in water or trichinae in pork ? For all these and many other things the ordinary buyer's knowledge is worthless : an expert must be employed. Such has been the experience of the English people, and the law now provides for the inspection by government experts of meat and fish, groceries, drugs, butter, and other articles of food. Gold plate and silver plate, gun barrels, steam boilers, drains and sewers, gas, weights and measures,all these are tested on the same general principle that the government through experts must guard the people from those serious dangers against which they cannot or habitually do not protect themselves. In reality, men do of course in this case protect themselves, but they do so through their government, which represents their cooperative effort, rather than each man for himself. For every man to attempt to do everything directly for himself would be to return to barbarism. Division of labor and cooperation are causes and signs of advancing civilization.
2. Governmental Protection of Labor.Nowhere was freedom more absolutely demanded at the time of the Industrial Revolution than for labor, and nowhere was it more needed. The old restrictions were galling and burdensome alike to masters and men. But what of the freedom that took their place? When machinery was introduced, it became possible to employ women and children in work that had formerly required the labor of men. But modern machinery is as destructive of life as a cannon is, if human life gets in its way ; and the destruction of life and limb in the early days of machinery was appalling. Here again it had been ingeniously argued that self-interest would lead employers to protect their employees from injury of every kind. The basis of the argument was of course the assumption that such protec--tion would be to the benefit of the employers. But this assumption is not valid. So scandalous was the neglect of the early manufacturers that a reaction set in against the old license, and laws were passed requiring under heavy penalties what the simplest dictates of humanity ought to have secured and would have secured if men had been fit to be left to unregulated competition. The employment of children four and five years of age, the bad ventilation of factories, working over hours, neglect of education of children, and many other evils, called for a like interference. Indeed, it would be hard to mention a point in which employers could neglect the interests of their employees and yet did not do so.
The result of a public recognition of these evils was a series of Acts of Parliament, known as the Factory Acts, beginning with that of 1802 and running down to the present time. Laws now in force provide, among other things, for: (1) the fencing in of all dangerous machinery ; (2) ventilation and other sanitary conditions in factories ; (3) a working day for women and children for most industries of not over ten hours ; (4) a Saturday half-holiday ; (5) prohibition of employment of any persons under eleven years of age, or of persons under sixteen, unless they present a certificate of fitness; (6) schooling for children half of each day or full hours on alternate days; (7) the keeping of a register by employers in which they must enter all to whom they give out work, thus giving opportunity to inspectors to inspect the places where such work is done; (8) government inspectors to see to the enforcement of the law. This slast provision has been found by experience to be one without which the rest of the legislation might as well not have been passed. In contrast with the provision which limits the work of women and children to not more than ten hours per day, place the old law of apprenticeship by which a boy must work at least from five in the morning till between seven and eight at night, with time off for meals. The change is significant as showing that whereas the old laws were framed in the interest of employers, modern ones have been designed in the interest of employees, or, to consider it more broadly, in the permanent interest of the people as a whole.
3. Trade-unions and the Government. As the wage system developed during the Industrial Revolution there was a natural tendency for the wage-earners to group themselves by trades into unions for the protection of their interests. So jealous were the ruling classes, and so fearful lest the lower classes, who greatly outnumbered them, might by combining abate their power, that they had passed laws against such combinations at intervals ever since 1360. Hence, when the wage-earners found the need of union rapidly increasing, they were driven to secret organization for lack of the open methods which were denied them. In 1800 Parliament, finding that in spite of the law unions were steadily gaining in strength and numbers, passed a comprehensive law to suppress them, even declaring illegal "all agreements between journeymen and workmen for obtaining advances of wages, reduction of hours of labor, or any other changes in the conditions of work." So odious did this law become that employers sometimes voluntarily pledged themselves not to have recourse to it. In 1824, after prolonged agitation, Parliament confessed the law a mistake, and at the same time repealed earlier laws relating to combinations of workmen. Thus freed from outlawry, trade-unions grew at an astounding rate. But they were still subject to legal persecution of one sort and another. Especially did they suffer at the hands of the courts from adverse decisions, which declared their united efforts to advance their interests conspiracies "in restraint of trade." Finally, in 1875, a law was passed which expressly declared that the purposes and actions of trade-unions were not to be held unlawful on the ground that they were in restraint of trade, and in the second place, that acts which are lawful when done by one person shall be held lawful even when done by two or more conjointly, if such acts are in furtherance of an object sought through a trade dispute.
Conclusion. We have pointed out a few of the many ways in which the new theory failed to justify itself when applied to the new economic power. The new power was that which created the revolution. The new theory was that which asserted the universal efficacy and beneficence of unrestrained industrial freedom, or unregulated competition. The theory and the power were alike strange to men. The new theory promised an immense increase in the product of national industry and a just distribution of the product among those who contributed to its making. An immense increase of product there was, though this was due to invention as well as to competition. But the theory failed to fulfil its promise as to the distribution of the new wealth. Not until benevolence was formulated and enforced by legislation was the situation in this respect endurable. The reaction against the theory was not sudden, nor was it a conscious and definite revolt at all. The essentially practical and concrete habit of mind of the English people has become proverbial. They had been driven into the temporary acceptance of unregulated competition by the great changes in industry. When weakness in the action of that principle became manifest, they simply changed its action little by little by applying the regulative power of government. And when the nineteenth century had passed, it was found that the good in the competitive principle had been retained, while the principle in its universal form had ceased to command assent. When, therefore, we hear the principle of a " fair field and no favor " and " no state intervention " advocated by a man strong in the consciousness of personal advantages, for such he is likely to be, we may know that he is a full century behind his time, and that he has not read or has not profited by one of the most impressive chapters of human history. For the English nation today, after a fair trial of free competition without government interference, has undeniably returned to the principle of governmental activity which she sought to abandon. Bitter experience has taught her that it is among the true functions of the State to protect its citizens and to further their material and social well-being by every law and every activity which can contribute to that end.
1.In the industrial stage men make things by machinery. The result
is separation of classes, keen competition, a development of money and
credit, and improved facilities for transportation.
2.In 1760 agriculture was still primitive, manufacture was in the handicraft stage, and there was much restrictive legislation.
3.After 1760 there was a revolution in the system of landholding and landworking, transportation was revolutionized, and the factory system was developed.
4.The Industrial Revolution produced great social confusion, im-moral competition, and violent fluctuations in trade.
5.A reaction against the old absence of restraint has made itself increasingly manifest in the years that have followed.
1.Characterize the three phases of the industrial stage.
2.How was production carried on before 1760? What was the nature of the markets?
3.What changes in social organization resulted from the Industrial Revolution ?
4.Describe the struggle of labor-unions for existence and for legal recognition.
5.Who was Adam Smith ? What was his significance as a voice of the time?
6.Discuss the question of the passive policy of government.
Cunningham, W.: The Growth of English Industry and Commerce,
Vol. II, Bk. VIII, Part II. Gibbins, H. deB.: Industry in England, p. 204 (revised edition). Hobson, J. A.: The Evolution of Modern Capitalism, Chs. II and IV. Hutchins, B. L., and Harrison, A.: A History of Factory Legislation (in England). Price, L. L.: A Short History of English Commerce and Industry, pp. 184-192; 192-201; 210-217. Report of the United States Industrial Commission, Vol. XVI, on Foreign Labor Laws. Toynbee, Arnold: The Industrial Revolution, Ch. IV, pp. 46-57. Webb, Beatrice (Potter) : The Case for the Factory Acts.