"Laissez Faire in Nineteenth-Century Britain: Fact or Myth?"

Paul, Ellen Frankel
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First Pub. Date
Winter 1980
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Literature of Liberty. Vol. iii, no. 4, pp. 5-38. Arlington, VA: Institute for Humane Studies
Pub. Date
1980
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Introduction: The Scholarly Debate over British Laissez Faire

P.1

Great Britain in the nineteenth century was a great bastion of individualism where that merciless principle of the political economists—laissez faire—dominated public opinion, and Parliament, under its sway, vanquished the last vestiges of an overweaning, Mercantilist state. Captivated by two allied and seemingly indomitable intellectual forces, the radically individualist, antistatist philosophy of the Benthamite Utilitarians and the rigidly free market economics of the Classical School, the Victorian era spurned governmental solutions to acute social problems. In its fanatic embrace of self-interest, self-help, and atomistic individualism, the period can only be characterized as an "age of laissez faire."

P.2

It is precisely this halcyon or demonic vision (depending upon one's political perspective) of nineteenth century British economics, political philosophy, and governmental policy that has come under withering assault in the last three decades. Particularly in the mid-1960s a debate raged in the professional journals over essentially three interrelated issues. (1) What policy conclusions did Classical Economics dictate, and the Classical economists, as individuals, endorse? (2) Did Britain in the nineteenth century, or in some distinct portion of it, personify the ideal of minimal governmental intervention in the economic and social realm, or rather, was the period the breeding ground for the rampant collectivism that would follow? (3) Finally, what was the essential thrust of Benthamism as a political philosophy, and as a theoretical tool for the analysis of policy; and what effect did Benthamites have upon the course of British politics? These questions ought not merely concern antiquarians, pedants, or those intrigued by semantic quibbles over the definition of laissez faire. If we are to comprehend the nature of the modern Leviathan state, we need to discern the forces which promoted its creation and to examine the arguments advanced in support of its nascent powers.

I. The Economic Policies of the Classical Economists

P.3

... the scholarship of the last forty years has proved beyond question that the architects of classical political economy cannot be characterized as upholders of the laissez-faire philosophy."*1

"To identify such doctrines [i.e., laissez faire] with the declared and easily accessible views of the Classical Economists is a sure sign of ignorance or malice."*2

P.4

While such ringing declarations of a cleavage between the political economists and laissez faire may be a bit hyperbolic when applied to such figures as Adam Smith or David Ricardo, these assertions seem far less controversial when directed at John Stuart Mill, Henry Sidgwick, or J. E. Cairnes. Those critics who take a dynamic rather than a static*3 view of the Classical School of economics agree that as the nineteenth century progressed the allegiance of leading economists to laissez faire became more and more attenuated. Whether one focuses upon the death of Ricardo in 1823, or the influence of Bentham's principle of utility, or John Stuart Mill's flirtation with socialism as constituting the definitive turning point toward a more activist, interventionist state, contemporary revisionist scholars concur in their assessment of the Classicals as deviationists from doctrinaire laissez faire.

P.5

One might add, that for practically all of these contemporary authorities the effort to rescue the early political economists from the clutches of extreme noninterventionism is motivated by a desire to rescue their reputations, and, indeed, professional economics in its incipient stage, from scurrilous charges of extremism, callousness, and rigidity that have repeatedly defiled their memories. With few exceptions, the Classical economists' deviations from pure laissez faire are praised as examples of their pragmatism, rather than condemned as departures from sound public policy. Also, a Classical School replete with deviations, exceptions, and considerations of expediency is a much more venerable ancestor for modern Keynesianism.

P.6

Motivational considerations aside, the revisionists' interpretations of the "normative" side of Classical economics is essentially accurate. The conventional vision of the followers of Adam Smith as radical antistatists, shunning governmental incursions into private economic relationships on all fronts is, quite simply, indefensible. As in all reigning myths, there is, however, a solid kernel of truth. While the Classical economists tolerated, and indeed encouraged, repeated governmental interventions to cure perceived social and economic ills, noninterventionism remained, to a greater or lesser extent depending upon the quirks of each particular economist, the regnant principle, and any departures from it required elaborate justification. The general presumption, then, was on the side of laissez faire; exceptions arose on an ad hoc, case by case, usually empirical basis; and the burden of proof lay on the interventionists. Of course, over time this laissez-faire presumption was attenuated until, in the hands of men like John Stuart Mill, its dim shadow could barely be perceived.

Robbins's Distinction of Two Individualist Moral Traditions: Natural Rights vs. Utilitarian

P.7

If the Classical economists' attitudes towards state intervention into the economy are to be rightly understood, we must delve beneath the surface of their various stands on such salient issues of their time as the poor laws and the factory acts to the more fundamental level of their metaphysical and moral presuppositions. In a seminal work published in 1953, The Theory of Economic Policy in English Classical Political Economy, Lionel Robbins attempted such an analysis. Dispensing with such traditionalist views as that of Jacob Viner*4 who perceived Adam Smith (at least) as an adherent of a natural law-natural rights philosophy, Robbins contended that the Classical school took its criterion for economic policy from the utility principle as adumbrated by David Hume. Thus, Robbins draws a rather sharp distinction between two traditions within eighteenth and nineteenth century individualist thought.*5 The first tradition, as personified in such figures as Frédéric Bastiat (1801-1850) and Mercier de la Rivière, founded a system of economic freedom upon natural law or natural rights underpinnings which spontaneously generated a milieu in which state intervention would be not only unnecessary but deleterious. The second individualist tradition, the English Classical school, subscribed to a Utilitarian moral foundation, rejecting all metaphysical ascriptions of natural rights as, in Bentham's pungent phrase, "nonsense upon stilts."*6 For the English economists, who followed this second tradition, the state, consequently, had a more positive function. They refused to lay down any categorical injunction against state intervention, relying instead upon the principle of utility—the greatest happiness of the greatest number—to test the consequences of each particular proposal for state activism.

P.8

Robbins's taxonomy of two distinct traditions is undoubtedly perceptive, but it fails in one significant respect. The Classical economists after Smith held nothing but contempt for either a natural law, deistic conception of the universe and man's place in it or for a moral philosophy buttressed by natural rights. Bentham spared none of his vituperative skills in excoriating such doctrines as mere self-serving myth, undefended and indefensible dogma, and his calumnies banished such Lockean encumbrances from the arena of respectability. But for Adam Smith (1723-1790), Bentham's predecessor, such was not the case.

Adam Smith: Naturalism and Laissez Faire

P.9

Upon careful scrutiny of both An Inquiry into the Nature and Causes of the Wealth of Nations (1776) and The Theory of Moral Sentiments (1759), Smith emerges as a largely, although not wholly, consistent advocate of naturalism.*7 In his philosophical premises—a belief in a natural, harmonious universe inhabited by men attuned by an innate moral sense to play their part in society, and a natural harmony of interests between non-rights violating individuals—Smith adheres to principles which Robbins classified as belonging exclusively to the Continental individualist tradition. However, it is beyond question that when it came to his discussions of permissible governmental activities, Smith became much more pragmatic and seemingly utilitarian.

P.10

There is a higher purpose to this quibble over the identification of Smith as either a naturalist or a Utilitarian. If one fails to distinguish between Adam Smith as a philosophical naturalist and the subsequent Utilitarianism of his economic successors, then one can only explain the gradual transition from quasi-laissez faire to quasi-statism as the result of social forces, the press of events, the blistering attacks of their critics, or some other equally weak or partial explanation. It is only when we pierce below the veil of their actual policy pronouncements, and examine this awesome shift from naturalism to utilitarianism that we can adequately comprehend the attitude of members of the English Classical School towards the state.

P.11

Adam Smith advocated a truncated state, limited in its functions to defending its citizens against foreign and internal aggression, and creating and maintaining certain necessary public works and institutions "which it can never be in the interest of any small number of individuals to maintain" because the profit would not repay the expense.*8 Of course, the inclusion of this "public works" category of permissible state intrusions nullifies the claim that Smith was a laissez-faire purist, or a consistent advocate of natural harmony of interests. But its inclusion was a harbinger of things to come, and that is its greatest significance. If the "system of natural liberty" broke down in certain cases, says Smith, and then we must be pragmatic instrumentalists in applying governmental remedies, why does it not break down in even more cases, inquired Smith's successors? Admittedly, Smith's own departures from noninterventionism were modest ones by contemporary standards—e.g. the state might intervene to provide such public works as roads, bridges, canals, lighthouses; to protect by tariffs industries necessary to defense and to retaliate against foreign tariffs; to grant temporary monopolies to joint-stock companies in unexplored areas; to regulate the banking industry; to prohibit usury; and to provide state funded education to children of the indigent; and to collect taxes—but they set a striking precedent for advocating interventions in future cases where markets were seen to operate inexpeditiously.

Ricardo and Malthus: Interventionism vs. Laissez Faire

P.12

For Smith's immediate followers, David Ricardo and Thomas Robert Malthus, the presumption not of market beneficence per se but of state incapacity remained quite strong. Given Malthusian population theory coupled with Ricardo's wages and rent theories, there was relatively little impetus to extend government's purview.*9 Of course, we would be grossly remiss not to mention Malthus's idiosyncrasies, particularly his rejection of Say's law (i.e., that supply creates its own demand, thus denying any pervasive disequilibrium within a general market). This deviation from the position of the Classical School led Malthus to propose government intervention to correct the market during depressions, including the endorsement of government debts and large public works projects for the unemployed.

P.13

From the impetus of another peculiar Malthusian doctrine, Malthus also broke the otherwise unanimous ranks of the economists in their efforts to repeal the Corn Laws. In contrast, Malthus's population theory which portended an immutable conflict between population growth and the means of subsistence, led him, as it did Ricardo, to vigorously advocate a gradual termination of the Poor Laws. It is in Malthus's introduction to the Principles of Political Economy (1820) that we first hear a refrain that would be repeated by other Classical economists—McCulloch, Sidgwick, Cairnes—that absolute laissez faire was not a doctrine endorsed by Smith and that such a blanket condemnation of all government regulation is nonsensical:

It is obviously, therefore, impossible for a government strictly to let things take their natural course; and to recommend such a line of conduct, without limitations and exceptions, would not fail to bring disgrace upon general principles, as totally inapplicable to practice.*10

P.14

David Ricardo (1772-1823) presents a curious case of an economist whose pure theories could have driven him to embrace interventionism, but who nevertheless endorsed a fairly abstemious and consistent noninterventionism. Ricardo's theory of rent and its projection of antagonistic class interests and his prognostication of an eventual stationary state did not lead him to abandon laissez faire. Why? Perhaps the explanation might lie in his understanding of these economic laws as tantamount to natural laws: hence, if government abridged them abysmal consequences would occur. Despite Ricardo's strong ties to Bentham, there was still a large measure of moralistic individualism and suspicion of government in Ricardo that had seemingly little to do with his pure economic doctrines. When it came to the activist campaigns of his day, Ricardo tended to adhere to noninterventionist tenets: he opposed state provision for the poor, favored the repeal of the Corn Laws, theoretically opposed schemes to tax inheritance, prided himself on never voting for an increase in taxes while a member of Parliament, voted for repeal of a whole host of interventionist taxes, opposed all protectionist measures, argued for the resumption of gold after the Napoleonic War, and favored expeditious payment of the national debt. Ricardo's one momentous aberration was his advocacy of a national bank, which finally came to fruition under Robert Peel's ministry in 1844. Despite this notable exception, Ricardo's adherence to laissez faire was more pronounced than any of his fellow Classical economists, with the exception of Adam Smith.

Bentham: Utilitarian Erosion of Laissez Faire

P.15

Jeremy Bentham (1748 -1832), a melioristic social engineer if there ever was one, laid the theoretical groundwork for the enervation of the "let alone" principle. Colin Holmes may even understate the case when he writes:

It is difficult to maintain that Bentham expounded a negative view of the state's functions, for according to his principle of utility the laws and institutions of government are to be judged and justified merely by their usefulness.*11

Bentham's explicitly avowed allegiance to Smithian economics was not destined to influence posterity. Quite the contrary, the legacy Benthamism would leave to posterity was inspired not by the individualist strands in Bentham's writings, but rather by his collectivist tenets. Bentham, while certainly not the earliest expositor of the utility principle, was undoubtedly its most zealous. If every proposal for governmental activism must be evaluated on its merits according to the utilitarian "felicific calculus," then it is only a matter of time before the laissez-faire principle is rendered nugatory in the wake of one enervating, rear-guard battle after another. But we do not need to speculate on mere potentialities for erosion, for Bentham was diligent enough to provide an extensive catalogue of what he termed "agenda" for government. By the time Bentham was finished enumerating various "agenda," his "be quiet" dictum for government lay mortally wounded. The following passage offers a compendium of permissible interference which Bentham endorsed in various of his writings:

... to establish Poor Laws, hospitals for the indigent, workhouses for the unemployed; to levy taxes for redistribution purposes and to decrease the need for direct taxes; to recompense victims of crime when the perpetrator is indigent; to safeguard national security and establish courts and internal police; to disseminate useful information to industry; to label poisonous substances; to guarantee marks for quality and quantity on goods; to set a maximum price for corn; to provide security of subsistence by stock-piling grain or granary bounties to producers; to encourage investment in times of unemployment; to grant patents to inventors; to regulate banks and stockbrokers; to promote government annuities and a voluntary government insurance plan; to establish government banks; to establish and enforce a government monopoly on the issuance of paper currency; to engage in public works to put the unemployed to work; and, finally, to establish institutes, boards, and universities.*12

P.16

A prodigious list, indeed, and one that underscores the interventionist proclivities of a liberalism founded upon Utilitarian principle as opposed to a natural rights based liberalism.

P.17

Most assuredly, Bentham in his philosophical, economic, and political writings incessantly urged state activism, but to characterize Bentham himself as a collectivist would be a gross oversimplification. Cohabiting in unholy alliance with his centralizing, social happiness maximizing tendencies was a core of individualism, of insistence that each person must count for one in the social calculus, that governmental remedies require a special justification, and that one must guard one's liberty against an overweaning and often corrupt state. Whatever tendency Bentham had towards invoking governmental solutions was held at bay by these individualistic precepts and by his admiration for Smithian economics.*13

Mill and Utilitarian Collectivism

P.18

It was left to Bentham's brilliant, rebellious, and eventually reluctant disciple, John Stuart Mill (1806-1873) to extrude the collectivistic tendencies in Benthamism and drive the principle of utility to its statist denouement. Driven to despair and a mental breakdown in his early twenties by the rigors of his father's aridly rationalistic, Benthamite regimen of education, Mill searched for new meaning for his life. This search led him to Coleridge, Carlyle, Comte, and even the socialist St. Simonians. The younger Mill's flirtations with socialism began as early as 1830. This attraction to Continental radicalism preceded his scandalous association with the humanitarian, Harriet Taylor. Perhaps Joseph Schumpeter's appraisal of Mill is a bit overstated, but it does capture much of the moral conviction which animated Mill's intellectual life:

Though repeatedly changing his position in details, he was from about his middle twenties on an evolutionary socialist of associationist complexion.*14

P.19

Mill's Principles of Political Economy published in 1848 became the leading text on economics for a generation, thereby salvaging Ricardian economics and introducing young economists to an increasingly (as new editions emerged) sympathetic examination of Continental socialist creeds. For anyone familiar with the debates of the 1820s over the scope and method of political economy, the Principles must have appeared anomalous. Both Nassau Senior and J. S. Mill had drawn a seemingly impenetrable barrier between the pure science of economics and the "art" of policy prescriptions. Economists, they had argued, could not, as scientists, give advice to statesmen. Curiously, Mill's Principles repaired to a Smithian conception of political economy in which the instructive powers of the discipline were, if not paramount, then of considerable importance. Apparently, Mill's motive for abandoning his "art-science" distinction was to present a political economy as encompassing as Smith's but bereft of his predecessor's natural law affinity and laissez-faire strictures.

Mill's Interventionism: The Split Between Production and Distribution

P.20

One weapon that Mill employed to advance the second objective was a distinction between the laws of production, which were held to be immutable, and the laws of production, which could be manipulated at the discretion of legislators. As Mill declared in his Autobiography (1873), the purpose behind this distinction was to underscore the flexibility of distributing wealth. Social arrangements regarding distribution, rather than being immutable, as previous economists implied, ought to succumb to redistributive schemes, particularly those concerning private property. It is not surprising, then, that Mill's "agenda" for government, under the aegis of the "general expediency" (utility) principle, exceeded in both magnitude and intrusiveness that of his predecessors. Not only did he endorse land nationalization, aid for the unemployed, the curtailment of inheritance, the granting of a right to relief, the enforcement of legal restraints against those among the poor who procreated, compulsory education, regulation of child labor, government housing schemes, but also the regulation or, if necessary, the nationalization of monopolistic or large scale industries. While laissez faire remained a principle to which Mill nodded respectfully, after the enumeration of his list of exceptions, virtually nothing is left of that once mighty barricade against the intrusive state.

Mill's Socialist Sympathies

P.21

But Mill's fleeting acknowledgment of noninterventionism was even further negated by his sympathetic evaluation of the socialists, St. Simon, Fourier, and Robert Owen. While Mill's views on the particular details of socialistic schemes underwent various modifications through the years,*15 a persistent refrain can be heard throughout—that a property based free market system is transitory, and that in all likelihood human progress will result in some form of socialism. The seductive appeal for Mill of equality, fraternity, and communalism certainly held little charm for his predecessors. In fact, if men like Malthus, Ricardo, or Senior mentioned socialism at all, it was to cast aspersions upon it. In all fairness, one ought to add a caveat: Mill was never a rabid collectivist, perhaps because he was too much of an intellectual elitist and individualist to trust the sovereignty of the masses, and particularly the stifling conformity of public opinion.

Cairnes and Sidgwick: The Split between Laissez Faire and Economic Science

P.22

Two disciples of John Stuart Mill, Henry Sidgwick (1838-1900) and J. E. Cairnes (1823-1875), completed in the 1870s and 1880s the Classical School's evolution toward constructing an impenetrable theoretical barrier between their economic science and laissez faire. In 1870, Cairnes delivered a revealing essay at University College, entitled "Political Economy and Laissez-Faire," in which he categorically denied that economics as a science had anything to do with laissez faire. Contending that the maxim had no scientific basis whatever, he dismissed laissez faire as a mere handy rule of practice, "useful, perhaps, as a reminder to statesmen on which side the presumption lies in questions of industrial legislation, but totally destitute of all scientific authority."*16 Cairnes also leveled a frontal assault upon the Smithian notion of harmony of interests and the "invisible hand" process which led individuals in pursuit of their self-interest to act in ways that prove beneficial to society. Society did not spontaneously organize itself, thought Cairnes, to promote the social good. He maintained that, despite the steady progression of laissez faire in the preceding fifty years, substantial social amelioration had not occurred. Ejected from the pantheon of scientific principle, laissez faire was demoted to a feeble reminder to legislators to move circumspectly in pursuit of social improvement. In a similar vein, Sidgwick promulgated a principle to replace the disgraced laissez-faire "dogma":

To sum up: the general presumption derived from abstract economic reasoning is not in favor of leaving industry altogether to private enterprise, in any community that can usefully be taken as an ideal for the guidance of practical statesmanship; but is on the contrary in favour of supplementing and controlling such enterprise in various ways by the collective action of the community.*17

P.23

Mill and his successor, Henry Sidgwick, when bombarded with socialistic arguments condemning the distributive effects of the free market as inequitable, challenging the private ownership of land as usurpation, and denouncing the capitalists' claim to profit as theft, conceded the "distributive justice" issue to the socialists. Here we see, most clearly, the effects of Bentham's jettisoning of natural rights moral theory with its theory of commutative rather than distributive justice. The principle of utility proved an unstable buttress for the laissez faire doctrine, as succeeding economists became less enamored of "invisible hand" explanations and more hospitable towards governmentally promulgated "reforms." If each proposed intrusion into the market must be judged upon a cost benefit, greatest happiness maximizing standard, with all the problems of measuring interpersonal comparisons of utility and unknown or unquantifiable costs that such a standard implies, governmental remedies are likely to be given a sympathetic hearing by economists. No longer would inflexible barriers, rigid principles, and doctrinaire injunctions stand between the economist and his enlightened social conscience.

P.24

The weight of authority, both from original and critical sources, leads ineluctably to the conclusion that as the Classical School evolved—as Bentham succeeded Smith, and Mill followed Bentham—the connection between economics as a science and laissez faire as a policy became ever more tenuous. Even Adam Smith, the grand mentor of the School, evinced pronounced and precedent setting departures from dogmatic laissez faire.

The Manchester School and Free Trade: Richard Cobden and John Bright

P.25

If the Classical School cannot be viewed as the great bastion and repository of noninterventionism in nineteenth century Britain, were there other forces who did argue for a purist laissez-faire doctrine? Indeed, there were. Theorists of the Manchester School, led by Richard Cobden (1804-1865) and John Bright (1811-1889), who worked tirelessly for the repeal of the Corn Laws, would be one frequently cited example. Their status, however, as a group predominantly motivated by laissez faire has been questioned by the revisionists who view them, rather, as proponents of free trade as the fundamental principle. Cobden's support of the factory acts would appear as an aberration if one viewed the Manchester School as fundamentally noninterventionist, and as further evidence if one held to the revisionist line.*18

Pure Laissez Faire: Martineau, the Journals, and Political Economy

P.26

It was the popularizers of political economy, such as Harriet Martineau and Jane Marcet, who dispensed laissez-faire nostrums in their purest form, although in the case of Martineau her general hostility towards the state did not extend to a denunciation of state provision of education. Other purist sources were the non-conformist journals and newspapers, particularly the Economist during the years 1843-1854 under the editorship of James Wilson and the Leeds Mercury of Edward Bain. It was the Economist which nurtured the budding antistatist, evolutionist, Herbert Spencer.*19 In such journals, one could find consistent and principled arguments that condemned such statist proposals as the sanitary laws, compulsory vaccinations, and state grants to schools.

P.27

In the popular mind of the time there certainly was an association between the political economists and the laissez-faire injunction against state interference. While the Classical School undeniably did pay homage to that maxim, the encomiums became less frequent and more qualified as the century unfolded. Finally, in the hands of John Stuart Mill and his successors little was left of noninterventionism but a hollow shell.

II. The "Age of Laissez Faire" and Benthamism

Dicey vs. the Revisionists on the Reality of Nineteenth-Century British Laissez Faire and the Significance of Benthamism

P.28

A. V. Dicey's classic study published in 1905, Lectures on the Relation Between Law and Public Opinion in England During the Nineteenth Century,*19a serves as the focal point for a reappraisal of the extent of laissez faire in British politics of the period and the causes which led to its decline and fall. Beginning with a somewhat injudicious article by J. Bartlet Brebner, "Laissez Faire and State Intervention in Nineteenth Century Britain," which appeared in the Journal of Economic History in 1948, a body of revisionist historiography emerged which challenged the fundamental assumptions of Dicey's thesis: that Britain in the years 1825 to 1875 enjoyed a respite from interventionism and realized the apotheosis of individualism; and that Benthamism was the primary force inspiring this liberalization. With Brebner's typically hyperbolic pronouncement the issues were joined:

Conceivably, British laissez-faire was a political and economic myth in the sense formulated by George Sorel half a century ago, that is, a slogan or war cry employed by new forces of enterprise in their political-economical war against the landed oligarchy. This seems the more likely when one discovers from their writings that Jeremy Bentham and John Stuart Mill, who have been commonly represented as typical, almost fundamental formulators of laissez-faire, were in fact the exact opposite, that is the formulators of state intervention for collectivist ends.... In using Bentham as the archetype of British individualism he [Dicey] was conveying the exact opposite of the truth—Jeremy Bentham was the archetype of British collectivism.*20

P.29

The subsequent controversy has focused upon the extent to which laissez faire prevailed in the political arena and—if it did prevail—during which part of the century; and whether Bentham and his followers influenced the course of events in an individualist or collectivist direction. The weight of opinion seems to fall on the side contesting against an "age of laissez faire," while the contending forces seem to be arrayed about equally on the question of the influence of Benthamism upon the political landscape. There is, however, near universal agreement that, at least in theory, Benthamism had a strongly collectivist tinge, as evidenced by the Utilitarian philosopher's penchant for reform schemes necessitating the creation of new administrative bodies with centralized inspectors empowered to oversee compliance. Numerous examples of this proclivity are enshrined in Bentham's Constitutional Code.

Dicey's Thesis: Benthamism's Role in Laissez Faire

P.30

If the contemporary debate is to be understood, we must first repair to Dicey's Law and Opinion. Dicey divided nineteenth century England into three somewhat overlapping periods: (1) 1800 to 1830 marked an epoch characterized as Old Toryism and legislative quietism; (2) 1825 to 1870 saw an England dominated by Benthamism or Individualism; (3) while 1865 to 1900 signalled the ascendancy of collectivism.*21 Dicey's characterization of the middle two quarters of the century as the apogee of laissez faire generated our contemporary controversy as did his assessment of both the nature and influence of Benthamism upon that alleged era of noninterventionism. Upon Dicey's analysis, laissez faire emerges as "in practice the most potent and vital principle of Benthamite reform."*22 Bentham's principle that the individual is the best judge of his own happiness cast a legislative shadow aimed at the removal of encumbering restrictions. But Dicey implicitly acknowledged the malleability of the utility principle when he wrote:

This dogma of laissez-faire is not from a logical point of view an essential article of the Utilitarian creed—But though laissez-faire is not an essential part of Utilitarianism it was practically the most vital part of Bentham's legislative doctrine, and in England gave to the movement for reform of the law, both its power and its character.*23

In order to preserve this specter of Benthamite individualism, Dicey performed some fancy footwork, for example, describing the passage of the factory acts (particularly the Ten Hour Act of 1847) as a defeat for the Benthamites that set a precedent for socialistic enactments that would nurture future collectivism. While the latter judgment seems judicious, it is difficult to maintain that such legislation was a defeat for the Benthamites, considering the number of them who were influential figures on the Royal commissions and who tirelessly campaigned for factory legislation.

P.31

In chronicling Britain's slide into legislative collectivism in the latter third of the nineteenth century, Dicey displayed a more measured appraisal of the effects of Benthamism upon the creation of Britain's administrative state. The principle of utility, the thrust for parliamentary sovereignty, and the extension and improvement of the mechanism of government, Dicey views as the enduring legacy of Utilitarianism which undermined (and he thinks this occurred unconsciously) the dominant individualism of the Benthamite creed.

In 1830 the despotic or authoritarian element latent in utilitarianism was not noted by the statesman of any party. The reformers of the day placed, for the most part implicitly, faith in the dogma of laissez-faire, and failed to perceive that there is in truth no necessary logical connection between it and the "greatest happiness principle" which may with equal sincerity be adopted by either believers in individual freedom, or by the advocates of paternal government... The Liberals then of 1830 were themselves zealots for individual freedom, but they entertained beliefs which, though the men who held them knew it not, might well under altered social conditions, foster the despotic authority of a democratic State.... Somewhere between 1868 and 1900 three changes took place which brought into prominence the authoritative side of Benthamite liberalism. Faith in laissez-faire suffered an eclipse; hence the principle of utility became an argument in favour, not of individual freedom, but of the absolutism of the State. Parliament under the progress of democracy became the representative, not of the middle classes, but of the whole body of householders; parliamentary sovereignty, therefore, came to mean, in the last resort, the unrestricted power of the wage-earners. English administrative mechanism was reformed and strengthened. The machinery was thus provided for the practical extension of the activity of the State.... Benthamites it was then seen, had forged the arms most needed by socialists.*24

However unwittingly, the Benthamites forged the tools of socialism by creating an efficient administrative state in place of the corrupt, medieval, nepotistic one which they decried.*25

P.32

Dicey's analysis of the impact of Benthamism is more sophisticated than some of his critics recognize. He does not absolve Benthamism of blame for the collectivism that ensued, but he steadfastly refuses to recognize that they consciously contributed to it. The unceasing efforts of Bentham's disciples in launching a propaganda barrage that altered the climate of opinion and won legislative approval for a large measure of the social engineering legislation of the 1840s escaped Dicey's scrutiny.

Brebner's and the Revisionists' Critique of Dicey

P.33

The revisionist assault upon Dicey, initiated by J. Bartlet Brebner, focused upon two features of Dicey's analysis: (1) that there was, indeed, an age of laissez faire in nineteenth-century England, and (2) that Benthamism was an essential ingredient in fostering the climate of individualism that characterized the period. Although these two issues are intimately intertwined in the revisionist literature, and also in the counter-revisionist work which that literature inevitably triggered, it will prove expeditious to examine the two arguments separately, as the commentators tended to diverge on the two as the debate wore on.

A. Was There an "Age of Laissez Faire?"

Brebner's Critique of the "Myth" of Laissez Faire

P.34

Brebner categorically denied such an era, branding it as a fallacious "myth." The supposed perpetrators of a laissez-faire ideology, Jeremy Bentham and John Stuart Mill, in Brebner's eyes, turn out to be the very opposite: apostles of state interventionism for collectivist ends. And while the state did remove its regulations from commerce in the early part of the century it simultaneously extended them to industry. Almost year by year a parallel development of laissez faire and state intervention can be documented, as competing political interests vied for power.*26 Occasionally one interest triumphed, but usually the battle terminated in an uneasy compromise. To Brebner, the "engine of change" in the nineteenth century was neither laissez faire nor state interventionism, but rather the basic forces of industrialization. Yet, there was from 1832 on, that is, from the year of the first Reform Act, a snowball effect of one intervention leading to the next.

In the large, power passed from the land to other forms of wealth and from them to the people, but as it did so, and as the three politico-economical elements moved in and out of the possible combinations of two against one, there was an astonishingly consistent inclination to resort to the Benthamite formula for state intervention.*27

P.35

Brebner's sympathizers, the most important of whom include Oliver MacDonagh, David Roberts, H. Scott Gordon, William B. Anydelotte, W. L. Burn, and Colin Holmes,*28 have succeeded in amassing powerful and persuasive documentation of a pervasive interventionism by the British government during Dicey's putative era of laissez faire. Their arguments, and the somewhat more feeble attempts at refutation by their adversaries, deserve a detailed examination.

MacDonagh and the Interventionist "Governmental Revolution"

P.36

In his influential article, "The Nineteenth-Century Revolution in Government: A Reappraisal," Oliver MacDonagh attempted to extrapolate from his earlier work on the emigration administration a model that would explain the genesis of what he conceived to be a "governmental revolution" in Britain during the middle portion of the nineteenth century. There were, he argues, powerful forces that contributed to this transformation in the functions of government, a transformation that definitively put to rest any belief that individualist forces could be left free to take their own, unregulated course. Conspicuous among these forces were the social problems generated by steam powered industrialization, the vast increase in the concentration and mobility of the population, the widespread influence of humanitarian sentiments, an increasing sensitivity of political institutions to the pressure of public opinion which generated a prodigious growth in Parliamentary investigative organs and legislation, and, finally, the possibility of solutions to social problems generated by technological developments in mass production and rapid transportation.

P.37

MacDonagh argues that it was these coterminous forces that created a partial collectivism upon which the government could build in the last quarter of the century. Once one understands both the mechanism at work in the earlier period and the momentum it generated, Britain's "very general collapse of political individualism" becomes comprehensible. The model MacDonagh offers for explaining this phenomenon of the growth of Britain's administrative state is compelling; although critics have found fault with its detail, they have by and large displayed little desire to dispute its perception of a profound administrative revolution.

P.38

According to MacDonagh's model, the first stage in the process was usually triggered by the exposure of some outrageous social evil (e.g. child labor, accidents in the mines, rampant disease in the cities) followed irresistibly by demands for a remedy:

No wall of either doctrine or interest could permanently withstand that single cry ('intolerable'), all the more so as governments grew more responsive to public sentiment, and public sentiment ever more humane. The demand for remedies was also, in the contemporary context, a demand for prohibitory enactments. Men's instinctive reaction was to legislate the evil out of existence.*29

Naturally, resistance was encountered from the endangered interests, but the usual result was not inaction; rather, a weak compromise was reached establishing a precedent for future, more comprehensive regulationism.

P.39

In MacDonagh's second stage, new revelations were publicized, indicating that the original evils remained untouched by the earlier legislation which lacked an enforcement mechanism and, thus, left compliance in the hands of local officials. These discoveries led to the third stage, the appointment of central administrators who gradually gained expertise in their fields and became a vocal force for agitating additional legislation and greater centralization.

P.40

The fourth stage in the growth of the administrative state was characterized by a new sophistication on the part of these centralized bureaucrats who began to view their mission as a protracted one. They substituted a dynamic for a static concept of administration, wherein they would play a leading role in closing loopholes and "tightening the screws." Finally, in the ultimate stage, these bureaucrats became enamored of the idea of scientific expertise and adopted a more or less conscious Fabianism. This process of administrative centralism helps to explain how collectivism "spread like a contagion out of sight" during the century.

Roberts's Attribution of the Rise of the Administrative State to Ad Hoc Responses to Industrialism

P.41

In his fascinating study, Victorian Origins of the British Welfare State, David Roberts advances a view of the genesis and motivations behind Britain's erection of the welfare state. Roberts's analysis is compatible with MacDonagh's contention that this statist development was largely unintended. In remedying perceived social evils, but not primarily economic evils, the Victorians laid the foundation for Britain's administrative, centralized, bureaucratic state. And they did so not out of any overarching ideological imperative, but rather from an ad hoc pragmatism which Roberts characterizes as "presumptuous empiricism." That the mid-Victorians were an activist breed cannot be denied once we consider Roberts's prodigious list*30 of new central administrations and commissions established during the period 1833 to 1854:

    I. Permanent Departments for General Administration
      A. Independent Commissions
        1. Poor Law Commission (1834)
        2. Ecclesiastical Commission (1836)
        3. Lunacy Commission (1842)
        4. Charity Commission (1854)
        5. Registrar of Births, Deaths, and Marriages (1836)
      B. Home Office Inspectorates
        1. Factory inspectors (1833)
        2. Prison inspectors (1835; after 1854 they also inspected reformatories)
        3. Anatomy inspectors (1839)
        4. Mining inspectors (1842 and 1850)
        5. Burial inspectors (1854)
        6. Constabulary inspectors (1856)
      C. Colonial Office
        Colonial Land and Emigration Commission (1839)
      D. Privy Council Departments
        1. Committee on Education (1839)
        2. Board of Trade
          a. Merchant Marine Department (1850)
          b. Department of Arts and Sciences (1852)
          c. Railway Board (1839)
          d. Commissioners of Patent and Invention (1850)
          e. Office of Registrar of Joint-Stock Companies (1833)
          f. Design of Registry Office (1839)
    II. Permanent Departments for the Metropolis
      A. Home Office: Metropolitan Police
        1. Inspectors of common lodging houses (1853)
        2. Inspectors of noxious trade (1854)
      B. Office of Woods and Forests and Public Works: expanded powers over Thames embankments, parks, and numerous streets
      C. Board of Trade
        1. Inspectors of London water sources (1852)
        2. Commissioners to regulate London's coal whippers (1843)
      D. Metropolitan Sewers Commission (1847)
      E. Metropolitan Building Commission (1844)
    III. Temporary Commissions
      A. Administrative
        1. Oxford University commissioners (1854-58)
        2. Commissioners of Tithes, Enclosures, and Copyhold (1836, Tithes; 1841, Copyhold; 1845, Inclosure; 1851, consolidated)
      B. Commissioners of Inquiry into:
        1. Statute law
        2. Cambridge University
        3. Fine arts
        4. Newcastle cholera
        5. London Corporation
        6. Charitable donations
        7. Three election disputes
        8. Mercantile law
        9. Registration and conveyance
        10. County courts

P.42

Roberts repeats a refrain that runs through the literature—that "Each reform was passed to meet an observed fact, not to accord with principle," and that the transforming event was not a party platform or political philosophy, but rather the phenomenon of the industrial revolution itself.

P.43

Roberts's arguments epitomize a strand of historiography which denigrates the role of ideas and individuals while attributing change to seemingly independent "forces." And so the industrial revolution, with its large factories, mines, railways, steamships, and crowded cities, led to the concentration of abuses and their increased visibility, and these abuses generated governmental restrictions. Other equally dehumanized "forces" operated in a parallel direction, for example, the advance of science, the rapid increase of wealth, a deep humanitarianism, and a growing belief in progress. In Roberts's analysis, these disembodied "forces" account for England's transformation from among the least interventionist governments in Europe in 1833, into one of those most involved in securing the wellbeing of its citizens by 1854. Thus, Britain succeeded, inadvertently, in creating "an administrative state which she didn't want."

P.44

Although Roberts evidently overstates his case for mechanism over human agency as an explanatory tool of historical change, he is undoubtedly on firmer ground in his appraisal of the ideological inconsistency of the leading forces in British politics of the day. While both the Conservatives and the Whigs had traditions of opposition to centralism, they both contributed to the creation of the administrative, interventionist state. Only one faction favored a strong, benevolent government, in Roberts's account, and that was the utilitarians, while the Tory Evangelicals, such as Lord Ashley (Earl of Shaftesbury), were also committed to reform, they did not operate from any consistent principle. Given his mechanistic viewpoint, however, Roberts remains reluctant to cede to either of these "active minorities" any conspicuous or controlling role in building the collectivist state.

Gordon's Distinction between Laissez Faire and Free Trade

P.45

The same general theme was sounded by H. Scott Gordon in his essay, "The Ideology of Laissez-Faire," but with a slightly different twist. Gordon denigrates the notion that the Anti-Corn Law crusade was the result of a principled laissez-faire position, citing the absence from the voluminous Parliamentary debate of a single mention of the term "laissez faire," and Sir Robert Peel's declaration that there were no more than half a dozen MPs who believed in applying that maxim to economic questions generally. What Gordon does perceive, instead, was a vigorous free trade ideology: "A widespread development of free trade ideology developed in mid-nineteenth-century England, but a similar laissez-faire ideology did not."*31 Thus, a substantial fault in historiography accounts for the fallacious identification of laissez faire and free trade. Once this apparent "high tide" of laissez faire in the successful effort to rescind the Corn Laws has been disposed of, Gordon's case for an ad hoc piecemeal growth of the administrative state concludes on (by now) familiar grounds.*32

Burn's "Age of Equipoise": Localism vs. Centralization

P.46

Perhaps the most equivocal position of the revisionists was enunciated by W. L. Burn in his study of mid-Victorian England, The Age of Equipoise. He characterizes the years between 1852 and 1867 as a particularly "confused period."*33 "It becomes more and more apparent that any hard-and-fast distinction between Individualism and Collectivism is not merely useless but harmful. The most that can be said is that public opinion had a bias toward Individualism."*34 What seems most pronounced to Burn, as to the other revisionists, is the piecemeal and theoretical approach to solving social problems as they jostled the public conscience. Rather than attempting to investigate the period along the lines of a conflict between individualism versus collectivism, he perceives a bifurcation as between the forces of centralization and localism.

Anti-Laissez-Faire Legislation

P.47

Before completing the revisionist case, we would be woefully remiss not to mention some of the key pieces of intrusive legislation that were passed in the period and repeatedly cited to buttress the revisionist case. This anti-laissez-faire legislation included: the Poor Law Reform Act of 1834 which established central inspectors (as did the Prison Act of 1835); the various Educational Acts from the 1830s on, which eventually culminated in 1880 in compulsory education at state expense; the prohibition of women, apprentices, and children under thirteen working in the coal mines in 1841 (and other acts extensively regulating the mines); the various Factory Acts which from 1833 on limited the hours of work for women and children; the inspection of asylums; the extensive regulation of railroads; the creation of the Metropolitan Building Act empowering the Board of Works to set building specifications (all this in the 1840s inspired by the Tory Paternalists); the Public Health Act of 1848; the Mining Inspection Act; Merchant Shipping Act; and Burial Ground Act of 1850; and other acts of the 1850s designed to regulate London's common lodging houses, to suppress smoke in London, to regulate lighthouses, to aid juvenile reformatories, to establish a permanent charity commission, to regulate the merchant marine, and to create a department of science and art in order to promote new technology. The list could go on, and every authority who makes such a compendium adduces somewhat different examples; there are certainly an abundance to choose from.


Notes for this chapter


1.
Colin J. Holmes, "Laissez-Faire in Theory and Practice: Britain, 1800-1875," Journal of European Economic History 5(Winter 1970):680.
2.
Lionel Robbins, The Theory of Economic Policy in English Classical Political Economy, p. 37. For appraisals of the extent of adherence to laissez faire among the classical political economists see: G. J. Stigler, "The Economist and the State," The American Economic Review 55(March 1965):1-18; W. D. Grampp, Economic Liberalism, and "On the History of Thought and Policy," Papers and Proceedings of the American Economic Association 55(May 1965):128-142; Jacob Viner, "Adam Smith and Laissez-Faire," Journal of Political Economy 35(1927), reprinted in Viner, The Long View and the Short; Joseph A. Schumpeter, History of Economic Analysis; Warren A. Samuels, The Classical Theory of Economic Policy; Thomas Sowell, Classical Economics Reconsidered; T. W Hutchison, 'Positive' Economics and Policy Objectives.
3.
E.g., Arthur J. Taylor, Laissez-Faire and State Intervention in Nineteenth-Century Britain, takes a dynamic view focusing upon both the shift of position by such figures as Senior and McCulloch over a twenty year period and the general movement away from laissez faire among the economists who succeeded Ricardo. Others, Sowell for one, tend to view the Classicals in a more static view with their differences on individual issues displayed but without generating a definite trend.
4.
Viner, "The Intellectual History of Laissez-Faire," The Journal of Law and Economics 3(October 1960):60.

    It is clear, moreover, that for Adam Smith laissez-faire, beyond its material benefits, had ethical or moral value in that it left to the individual unimpaired that 'natural system of liberty' to which he had a natural right. It is quite probable, therefore, that Adam Smith would have rejected an extensive program of state regulation of economic enterprise even if he had believed that the wealth of nations would thereby be augmented.

See: R. Lindgren, The Social Philosophy of Adam Smith for an interpretation of Smith as outside the natural rights tradition.

5.
Lionel Robbins, Theory of Economic Policy, p. 177.
6.
Jeremy Bentham, Anarchical Fallacies, Works, II, p. 501.
7.
See Ellen Frankel Paul, Moral Revolution and Economic Science, Chapter I.
8.
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, IV, ix, p. 51.
9.
Others, now called Ricardian socialists, would employ Ricardo's theory of rent to argue for land nationalization. After all, if landowners enjoy windfall returns as a result of the scarcity of land and the premium paid for more advantageous plots, and not as a result of any merit on their part, why not nationalize the unjust returns. Such, of course, was not Ricardo's opinion; rather, he argued for repeal of the Corn Laws to forestall for a short period the time of reckoning.
10.
Thomas Robert Malthus, An Essay on the Principle of Population as it Affects the Future Improvement of Society, p. 16.
11.
Colin J. Holmes, "Laissez-Faire Theory and Practice," p. 677.
12.
Ellen Frankel Paul, Moral Revolution and Economic Science.
13.
For discussions on the extent of Bentham's adherence to Smithian economics and his place in the Classical School see: J. B. Brebner, "Laissez-Faire and State Intervention in Nineteenth-Century Britain," Journal of Economic History, Supplement 8(1948); J. W. Hutchison, "Bentham as an Economist," Economic Journal (June 1956), pp. 288-306; A. V. Dicey, Lectures on the Relationship Between Law and Public Opinion in England During the Nineteenth Century; Leslie Stephen, English Utilitarianism.
14.
Joseph Schumpeter, History of Economic Analysis, p. 531.
15.
For a detailed examination of Mill's various metamorphoses on the question of socialism see: Lionel Robbins, The Theory of Economic Policy, Lecture V; and Ellen Frankel Paul, Moral Revolution and Economic Science, pp. 167-175.
16.
J. E. Cairnes, "Political Economy and Laissez-Faire," p. 244.
17.
Henry Sidgwick, The Principles of Political Economy, p. 417.
18.
For a study of the Manchester School of Economics; Bernard Semmel, The Rise of Free Trade Imperialism, Classical Political Economy and the Empire of Free Trade and Imperialism, 1750-1850; Norman McCord, The Anti-Corn Law League, 1838-1846.
19.
A more extensive discussion of such sources can be found in Colin Holmes, "Laissez-Faire in Theory and Practice," pp. 680-682; and Arthur Taylor, Laissez-Faire and State Intervention, pp. 27-30.
I would like to thank Robert Hesson of the Hoover Institution for his valuable assistance in locating portions of the literature discussed in this section.
20.
J. Bartlet Brebner, "Laissez Faire and State Intervention in Nineteenth Century Britain," pp. 59-60, 61.
21.
Other early historians who share Dicey's view of the nineteenth century as embodying a protected period of laissez faire include: W. Cunningham, The Growth of English Industry and Commerce in Modern Times, Part II: Laissez Faire; C. R. Fay, Great Britain From Adam Smith to the Present Day and Life and Labour in the Nineteenth Century; L. C. A. Knowles, The Industrial and Commercial Revolution in Great Britain During the Nineteenth Century; E. Lipson, Planned Economy or Free Enterprise: The Lessons of History.
22.
A. V. Dicey, Law and Opinion, p. 144.
23.
A. V. Dicey, Law and Opinion, pp. 144, 146.
24.
A. V. Dicey, Law and Opinion, pp. 307, 146.
25.
A. V. Dicey, Law and Opinion, p. 309. For a more recent appraisal which supports Dicey's view of the Benthamites' contribution to collectivism as an unwitting one see: Arthur J. Taylor, "Laissez-Faire and State Intervention in Nineteenth-Century Britain," pp. 36-37. Taylor contends that there exists a fundamental dichotomy between the views of the Benthamites and the Fabians towards the state: that the Fabians saw the state as a positive tool to promote the greater good, while the Benthamites took it to be a negative institution reluctantly required on occasion to secure the greatest happiness. "To this extent the Utilitarians' contribution to the emergence of the Welfare State, however real, was essentially an unwitting one... it may be claimed with no less plausibility that had there been no Bentham the nineteenth century would have had to create one."
26.
J. B. Brebner, "Laissez Faire and State Intervention," p. 65.
27.
J. B. Brebner, "Laissez Faire and State Intervention," p. 65.
28.
Oliver MacDonagh, "The Nineteenth-Century Revolution in Government: A Reappraisal," The Historical Journal 2(1958):52-67; David Roberts, Victorian Origins of the British Welfare State; H. Scott Gordon, "The Ideology of Laissez-Faire," in A. W. Coats, The Classical Economists and Economic Policy; William D. Anydelotte, "The Conservative and Radical Interpretations of Early Victorian Social Legislation," Victorian Studies, No. 2(1967-68):225-236; W. L. Burn, The Age of Equipoise: A Study of the Mid-Victorian Generation; Colin J. Holmes, "Laissez-Faire in Theory and Practice: Britain, 1800-1875," pp 671-688.
29.
Oliver MacDonagh, "The Nineteenth Century Revolution in Government," p. 58.
30.
David Roberts, Victorian Origins of the British Welfare State, pp. 93-96.
31.
H. Gordon, "The Ideology of Laissez-Faire," p. 202.
32.
H. Gordon discovers further ammunition for his case in the work of Anydelotte, "The Conservative and Radical Interpretations of Early Victorian Social Legislation," who examined the division lists in Parliament during 1841 to 1871 on radical proposals regarding political reform, the Corn Laws, and the Ten Hours Bill. He found almost no statistical relationship between how men voted on reform and the Corn Laws, and how they voted on economic regulation in the Ten Hours Bill. The conclusion reached was that there was no underlying ideological consistency that prompted men in their voting behavior. "Radical reform... and the regulation of working hours in factories constituted two different attitude dimensions largely unrelated to each other," p. 233.
33.
W. L. Burn, The Age of Equipoise, p. 217.
34.
W. L. Burn, The Age of Equipoise, p. 150.

End of Notes


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