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Standard of living and economic transition

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The Montreal Review, November 2010

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In this short essay, I do not have the ambition to prove a point. My goal is to clarify the importance and the meaning of the inevitable question about the standard of living in periods of swift transition from one form of economic organization to another. I call this question "inevitable" and I see the debate over it unavoidable, because as long as the societies experience deep economic transformations in the period of one or two generations they will think about how people endured these times. People will ask questions: what has changed, what has been lost, and who has won. Asking the same questions, they would give different answers, reflecting their own values, experience, feelings, ideology and beliefs. Choosing the arguments and the facts to support their logic, they would often be impartial, because the revolutionary transformation (political, economic, cultural and social) is always filled with intellectual and moral energy, with emotion, with winners and losers.

It is not surprising that the most heated debates over the standard of living in the period of the Industrial Revolution in England were in the 1950s and 1960s when the ideological battle between the communist socialism and the liberal capitalism was most fierce. The Marxists sought to find evidences that reveal the original sin of capitalism, while the emerging neo-liberal thinkers, that revolted against the Keynesian wisdom and eventually became masters of the neo-liberal revolution in economic thought of the 1980s - 1990s, were searching for proofs that showed the virtues of the capitalist system even in its unconscious infancy. 1 Although not so strong, the debate continues today. "Does Globalisation bring wealth or poverty to developing nations?" was one of most debated questions among political and economic thinkers in the 1990s and the early 2000s. Today, under the pressure of the longest recession in recent history, we inevitably ask what are the virtues and the sins of the Chinese "state capitalism?" Are the exploitation, the sufferings and sacrifices of the workers in China, India, or Bangladesh, acceptable and necessary for the better future of their children? What stays behind the Chinese thrift and money savings: the workers' wages or the accumulated capital of their masters? How did the standard of living improve or decline in East Europe immediately after the fall of the communism? Are East Europeans happier and wealthier today than before?

One of the virtues of history is that it gives us answers for the present. True, not always complete, not always satisfactory, sometimes even wrong, but answers that always serve as landmarks without which we cannot find the meaning of our contemporary life. So let us see how the standard of living of the workers during the Industrial Revolution in England was debated in the twentieth century and how we can make it useful for us today.

There were two parties in this debate, which tried to find a middle ground, but often got into extremities. The "optimists" and the "pessimists" about the standard of living of the workers in the early industrial England faced the same difficult task as every researcher of the revolutionary process. If one imagined the revolutionary period as a big stirred puzzle with missing pieces from two thematically connected sides (one with the picture of the old system, before the revolution, and the other one with the picture of the new order), one would find out how complicated the task to make a satisfactory whole from the mess is.

Professor Hartwell ("an optimist") and Professor Hobsbawm ("a pessimist") were the two prominent historians in the 1960s -1970s' debate on the standard of living. They wanted to put in order the evidences of the life of the English working class between 1800s and 1850s, and when necessary to fill the blank spots with their own interpretations.

R.M. Hartwell, who is honorary fellow of the neoliberal Institute of Economic Affairs and author of a book about the history of Mont Pelerin Society, 2 published in 1971 The Industrial Revolution and Economic Growth, where he gave an answer to the pessimistic view that increasing poverty and misery among the workers accompanied the first stages of industrial revolution in England. In a chapter entitled "The Rising Standard of Living in England, 1800-1850," he writes that the debate on the standard of living had not been "objective," based on the facts as known, but "controversy about values." 3 He gives the example of two extreme views in historiography, those of J. Kuczynsky who declared that the period "brought about a rapid deterioration of the condition of the working class," 4 and the opinion of J.H. Clapham according to which "for every class of urban or industrial labour about which information is available... wages had risen markedly." 5 Hartwell notes that historians often "exaggerate" the trends and "over-dramatize" the events without feeling that they violate the facts. He says that "exact" 6 measurement of the standard of living may be impossible, but a "firm statement" about the trend of living standards can be derived. And right after this declaration he says that his aim in this part of the book is to prove that during the industrial revolution there was an "upward trend" in living standards.

His argument is the following: the analysis of incomes, wage-price data, consumption, and the comparison with the eighteenth-century living standards shows that per capita income of the working class increased, the prices (after 1815) fell while money wages remained constant, the government increasingly intervened in economy to protect or raise living standards, thus real wages of the majority of English workers were rising in the years 1800-50. 7 How big was this improvement? Hartwell argues that between 1800 and 1850 the average real income "doubled", with the reservation that the upward trend was uneven, but there was "already... fifty percent" increase by 1830. 8

In the next chapter of the book, entitled "The Standard of Living: An Answer to the Pessimists," Hartwell replies directly to his opponents, especially to E.J. Hobsbawm who, in 1963, criticized two of Harwell's articles published in the previous years. Here he contradicts himself saying that he "modified" his conclusions by stressing that "the standard of living was not high and was not raising fast before the forties, and also there was "dire poverty" and "cyclical and technological unemployment." 9 It is a serious modification from the previous chapter where he argues that by 1830s there was fifty percent increase of the real incomes. Yet he does not give up his basic view that the early industrial period was of "increasing opportunity" for working-class men and women.

My reading of Hartwell did not help me to construct a satisfactory picture of the living standards during the industrial revolution. However, I am prone to accept his general view, despite (or perhaps because of) its vagueness, that this was a period of "increasing opportunities."

Thus, I turned to the pessimists. E.J. Hobsbawm was the leading moderate voice among them. In a paper published in Economic History Review in 1957, he says a few basic things. He argues that the living standards could not rise because there was no effective mechanism for equal distribution of wealth and because of the inefficient investment mechanism, which did not allow spending of enough capital for wages. 10 "At best... we should expect improvements in the standard of living to be much slower than they might have been, at worst we should not be surprised to find deterioration," concludes Hobsbawm. 11 But this is a vague statement that does not help us to know what happened with the living standards in England in the first half of nineteenth century. However, Hobsbawm makes the important warning that "we must beware of interpreting the qualitative differences between urban and rural, industrial and pre-industrial life automatically as differences between "better" and "worse." 12 With this warning, which I completely agree with, he approaches the debate showing what according to him is wrong in the "optimists'" methodology: he says that the evidences that might lead us to relatively right conclusions are in a) mortality and death data, b) unemployment data, and c) consumption. He rejects the "optimists'" wage and price approach.

Here I will not say what conclusions Hobsbawm reached, because they again were not final and cannot be a satisfactory answer to our question. But I agree with his warning that we must beware of interpreting the qualitative differences and empiricist data. My opinion in all this debate is that for certain groups of labouring classes early industrial England was a place and time of "increasing opportunities." There is consensus among historians that after the 1840s the living standards were raising for the majority. Moreover, the increasing formation of a middle class is even better indicator for the existence of growing opportunities. Second, if we examine a period of revolution we must remember that the simple data and measuring (the "empiricist" approach) cannot give an answer about the realities of life. The controversy simply cannot depart from the realms of "values" - something that Hartwell unjustly criticizes. Even today, more than fifty years later, the historians continue to work with insufficient data from this period. More importantly, under economic revolution the big changes are in lifestyle, work relations, and culture. All these are sociological and cultural factors that cannot be measured. I am disposed to accept that the changes in real incomes (positive or negative) were insignificant comparing with the changes in lifestyle, work relations, and culture. I found a similar opinion in E.P. Thompson's The Making of the English Working Class. Thompson says, "no serious scholar is now willing to argue that everything was getting worse" as "no serious scholar will argue that everything was getting better" 13 and "...some of the most bitter conflicts of these years turned on issues which are not encompassed by cost-of-living series. These issues which provoked the most intensity of feeling were very often ones in which such values as traditional customs, "justice", "independence", security, or family-economy were at stake, rather straightforward "bread-and-butter" issues... wages were of secondary importance." 14

As we have seen in the debate between Hobsbawm and Hartwell, both historians tried their best to draw their conclusions closer and to discard extremities of the view. Thompson's own conclusion was that in 1790 the condition of the majority was bad; it remained bad in 1830, while in the next two decades there were increases of real wages with periodic declines. 15

Although it is very interesting, I think that the debate on the living standards in periods of economic transition is not so important. If we really want to build a decent picture of the life of the working class, we should consider the changes in its consumption habits, the changes in its work and living environment, how workers use their leisure time and how much of it they have. We should ask also if there is a significant change in the living standard of their children, the next generation, which can serve as an indicator about the size and the real value of their savings.

If we look at the early nineteenth-century England through these indicators, we will inevitably turn to the Marxist sociological approach. It will help us a lot with the general picture. Marx's observation that "the hand-mill gives you society with the feudal lord: the stem-mill, society with the industrial capitalist" 16 is difficult to reject. In early industrial England, there were not mechanisms, as Hobsbawm notes, for better distribution of wealth. It was a period of uncontrolled capital accumulation. The workers received certain good of it, because the growth in national wealth always results in overflow of wealth to the lesser layers of society, but the capital was concentrated in the hands of the capitalists, and these hands were free from government regulations, trade-union pressure or any other form of balancing control. Hartwell agrees that the rise of the real incomes in the 1830s was based not on rise in the wages, but on their stabilization combined with declining prices and increasing productivity. Thus, he agrees that the capital did not flow to the working class through the free will of the industrial capitalists.

One thing seems indisputable, and this is the existence of exploitation. The exploitation is a typical feature of every deep economic transformation, no matter if it is capitalist, communist, industrial, or post-industrial. The industrial economy of communist Russia was build on the back of the people, Stalin's command economy cost millions of human lives; the work relations in early communist Russia did not distinguish from these in labour camps. The Gilded Ages of America were manifested under the ideology of Social Darwinism. Today, the state capitalism in China is showing how the ordinary worker is underpaid, has insufficient leisure time, and has miserable living conditions. If one asks an East European today whether his standard of living has changed after the fall of communism, he or she, perhaps, would say that what matters are the political and business morals, the lack of free education and health care, and not the standard of living. 17

The swift economic transformations are always accompanied with sacrifices. Thomson notes that for most working people the crucial experience of the Industrial Revolution was felt in terms of changes in the nature and intensity of exploitation. He gives the account of " A Journeyman Cotton Spinner ," written in 1818 (the year when Marx was born), which I would like to quote for conclusion of this essay:

"They [the employers, the cotton-mill owners] are literally petty monarchs, absolute and despotic... their all time is occupied in contriving how to get the greatest quantity of work turned off with the least expense... Master spinners are anxious to keep wages low for the purpose of keeping the spinners indigent and spiritless... as for the purpose of taking the surplus to their own pockets... They [the workers] have been for years, with their wives and their families, bondmen and bondmen of their cruel taskmasters. It is vain to insult our common understandings with the observation that such men are free; that the law protects the rich and poor alike, and that a spinner can leave his master if he does not like the wages. True; so he can: but where must he go? Why to another, to be sure. Well: he goes; he is asked where did you work last: "did he discharge you?" No; we could not agree about wages... So that the man is bound, by a combination of circumstances, to submit to his master." 18

If we take this account seriously, the question of standard of living inevitably comes second after the question of exploitation, exploitation no matter where and when - in early industrial England, modern China or India, or in any place of the world experiencing swift economic change.

-- T.S.Tsonchev

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1 The early capitalism was"unconscious", it existed in practice, but there were no developed theories and understanding of how exactly it was functioning. There was no consciousness about its nature. Which was normal - the childhood and adolescence are periods of growth, a time for learning, not of knowledge. In eighteenth century, Adam Smith predicted the liberal and liberating nature of capitalism while the system was still in its embryo development. In nineteenth century, Marx revealed its dark side, its savage and exploitive character. Since then, especially after Keynes' intellectual rupture with the prevailing economic wisdom in the middle of the twentieth century, we have built some knowledge, some understanding of the system. Today, the majority believes in the existence of the contradictions of capitalism (See, for example, Daniel Bell's masterpiece "The Cultural Contradictions of Capitalism"). The Western politicians (even the American republicans - George Bush's bailout program) are trying to balance between the opposites. The consciousness of the nature of capitalism promises that we might control the system: to suppress its dark sides, while encouraging its bright ones.

2 A legendary group of neo-liberal economists, social thinkers and philosophers, among which Friedrich Hayek, Karl Popper, Ludwig von Mises, George Stigler, and Milton Friedman.

3 R.M. Hartwell, The Industrial Revolution and Economic Growth (Methuen & Co Ltd., London, 1971), p. 313.

4 J. Kuczynsky, A Short History of Labour Conditions in Great Britain from 1750 to the Present Day (London, F.Muller, 1947) p.16. Quoted by Harwell.

5 J.H. Clapham, An Economic History of Modern Britain. (Cambridge University Press, 1925) p.561. Quoted by Harwell.

6 Hartwell's italics

7 Ibid, p. 314

8 Ibid.p. 315

9 Ibid. p. 344-345. Hartwell's italics

10 E.J. Hobsbawm, The British Standard of Living 1790-1850 (Economic History Review, Vol. 10, No. 1 (1957), p. 47

11 Ibid. p.47

12 Ibid. p.47

13 E.P. Thompson, The Making of the English Working Class" (Penguin Books, 1979), p.228

14 Ibid. p.222

15 Ibid. pp.228-229

16 Quoted by E.P. Thompson in The Making of the English Working Class" (Penguin Books, 1979), p.208

17 Curiously, the wish for higher standard of living was among the main reasons for the anti-communist feelings in the late 1980s. The majority of people actually tolerated the political system, but they wanted western cars and shops full with goods. On mass level, the anti-communist feelings were result of the dreams for consumer society like those in West, known mainly from movies and magazines; for the majority political ideology was of secondary importance.

18 Ibid. 218-219

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