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Richard Ely on Industrial Civilization and Socialism August 22, 2011

Posted by Christopher Donohue in History of Economic Thought, History of the Human Sciences.
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Almost every economist who wrote from the French Revolution to the interwar period (and perhaps even to today)  defined the principles of their economics or political economy along with a narrative of the development of civilization.  Richard Ely was no exception.

Richard Theodore Ely (1854–1943)

As with Smith and Malthus, in Ely’s economics the reader is treated to several prolonged discussions of why savages made tools, what herdsmen were really like, and how medieval towns came into being. Not only did economists from Adam Smith forward have to address the increasingly complexities of land, labor, and capital, as well as banking and finance, but also the emergence of a new kind of civilization, industrial civilization. Ricardo and Marx’s discussions of technology and machinery alone argue for their continuing relevance.

Ely’s Elementary Principles of Economics (1915), intended for students, began the discussion of the emergence of industrial civilization with the all-too-familiar conceit, the “hunting and fishing stage.”  In this initial stage of development, economic activity is “isolated.”  Ely considered the earliest stages to be “independent economy” with little exchange of goods or coordination among individuals.  Ely also distinguished between two fundamentally differing views towards the natural world in human beings’ march towards civility, namely, “between uncivilized man, who uses what he finds, and civilized man, who makes what he wants.”

For Ely, like Henri Bergson and Hannah Arendt, the psychic and communal history of mankind- or as nineteenth and early twentieth century thinkers described it, the internal and external man- is the history of the emergence of homo faber.  Discussions of the homo faber and his emergence raged among nineteenth and twentieth century French, German, English, Russian, and American social thinkers, and Ely is no exception.

For Ely, a critical stage between finding and making, is the man who raises, meaning, “he has learned to a limited extent to give direction to the forces of nature” through farming.  Farming is a form of crude production in which the individual learns how to save, to subdue “living nature.”  While farming caused an increase in wealth it initially did not lead to an increase in commerce.  Only with the development of agriculture, with the management not only of differing kinds of grain but also through the introduction of animal husbandry, was there an increase in population as well as the birth of commerce.

With an increase in the number and concentration of individuals in settlements, there was a corresponding development of the arts and manners which made the first political organization possible. As important as the increase and concentration in population was the development of the institution of private property.

Ely is no different than Locke, Henry Maine, or Frederic William Maitland in his account of the origins of private property, and the importance of the move from status to contract.  Without private property there was no move to true civilization.

After agriculture came the “handicraft” stage, which saw the development of money, the guild system, and cities. In all of these points Ely remains consistent with Weber, Smith, and some of the more neutral general descriptions of Tonnies.   With cities, there emerged the idea of liberty in the West. With the rise of the cities, with their merchants and money, their guilds and masses of laborers, there came the rise of the industrial stage of civilization.

The distinguishing feature of the “early” phase of industrial civilization, from 1760 to 1830, was in the development of the machine industry and the utilization of steam power,  while in the period from 1830 to 1870, the distinguishing characteristic was in the development of steam transportation.  In the period from 1870 to 1910s , Ely concluded, like Marx, that this stage of industrial civilization was defined by “been the concentration and integration of capital in the fields of manufacture and transportation.” Much like Marx too Ely underscored the revolution brought upon the structure of society through the introduction of industrial manufacture.

For Ely as well as Marx, the feudal period was a labor utopia, in which there were no class divisions in the handicraft and guild systems, where every journeyman could look towards his future of being a “master.”  Ely treats the reader to the story of how the factory system, begun by a few highly successful risk-taking entrepreneurs, produced a two antagonistic industrial classes.  With the advent of the factory system not only did wages emerge but competition on a global scale.

From the Middle Ages forward, capitalism had expanded from a “town economy” to a “world economy.”  Such a transformation increased competition to such a level where it brought about good results, namely, “invention followed invention,” businesses opened where they had the most advantageous position, and  machinery increased the division of labor and lowered production costs. Ely also discusses the moral and legal ramifications of industrialization as he sees them.

Much like Tonnies and Simmel, Ely registered the same concern with the effect of urbanization and population growth and the disintegration of family and community.  It was one of the characteristics of industrial society that the distinction between “stranger” and “neighbor” was no longer clearly defined.  Like Simmel, Ely argued that modern economic transactions increase the scope of individual freedom and allow individuals a greater range of both physical movement and interpersonal connections.  With an increase the number of interpersonal connections came a corresponding reduction in the intensity of those relationships.

Ely’s characterization of industrial society was essential to his account of socialism.  Without industrial civilization, there could be no state socialism, the theory of socialism in economic practice.   For Ely, socialism was “industrial democracy” in which all the functions of business enterprises would be controlled by the state.  The state was nothing more than the people in their “organic capacity,” meaning that every individual in the state had the same rights and responsibilities as any other.  The organization of labor and the business of politics would be one and the same under state socialism.  Socialism, as an ethical system, was nothing more than “distributive justice.”

Interestingly, Ely conceded that many elements  of a future socialist state were present in the American state.  The United States government managed the postage and was responsible for road maintenance.  Both European and American governments also intruded upon the affairs of businessmen and manufacturers in a variety of ways, including the protection of persons and property, the regulation of contracts, and in their attempts to promote or protect enterprises through tariffs.  Socialism was therefore merely an extension of the existing functions of government until it took over all productive enterprises rather than just a portion of them.

However, socialism, at least in its pure theoretical form, was unattainable and ill-considered.  In the first place, socialism would numb the motivation to work due to the absence of the institution of private property.  Ely considered the agricultural sector to be incapable of centralization and state coordination.   As fatal was the problem of assigning tasks and regulating the work of millions of workers, all of whom had differing interests. Ely also contended that “the domination of a single industrial principle is dangerous to civilization.”  Although Ely advocated a better coordination of government and private interests, he did not agree with either the goals or the means of state socialism.

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Comments»

1. Toby - August 23, 2011

Fascinating.

2. simon - August 26, 2011

Hi Christopher,

I hope you do not object to my voicing criticisms on your blog (I assume this is why there is a public reply function). As before, my remark is mainly incidental to your main post. You begin:

“Almost every economist who wrote from the French Revolution to the interwar period (and perhaps even to today) defined the principles of their economics or political economy along with a narrative of the development of civilization. Richard Ely was no exception.
As with Smith, Ricardo, and Malthus, in Ely’s economics the reader is treated to several prolonged discussions of why savages made tools, what herdsmen were really like, and how medieval towns came into being.”

My knowledge is certainly limited, but this seems a rather heavy-handed treatment of the history of political economy in this period. J.M. Keynes certainly did not feel called upon to provide any narrative of the history of civilization. J.S. Mill, the most influential English political economist of the C19th did, it is true, provide a minimal sketch of this history at the start of his ‘Principles’ – but the sketch really is minimal to the point of irrelevance. I have no sense that either Jevons or Edgeworth gave such a narrative anywhere, nor Pigou, Denis Robertson, or any of Alfred Marshall’s students. But most importantly, I do not think Ricardo treats his reader’s to any discussions of savages, herdsmen or medieval towns; and more importantly, none of the so-called English ‘historical economists’ of the last decades of the C19th thought Ricardo did so.

Thus, you seem to be collapsing into a single monolithic framework a history that, at the very least, involves competing historical and a-historical approaches to political economy. Your Ely sounds like he spent some time in Germany reading the likes of Schmoller and Brentano (all this discussion of ‘handicrafts’ has all the hallmarks of Younger German Historical Economics – including an absorption of some of Marx’s writings). By the same token, he certainly does not appear to fit comfortably with either mainstream classical or neo-classical English economists. (This of course opens up many interesting possibilities as to a distinctive history of North American political economy.)

Am I, perhaps, missing something?

Christopher Donohue - August 30, 2011

Simon,

Thank you for your comment. I apologize for the slight delay in response as I’ve only had my power restored today from the hurricane. I’m not sure if I can clarify all of the issues you raise in this response, but I would be more than happy to consider any further questions you may have, as well as any further clarifications or corrections.

You are absolutely correct about Mill and Ricardo, about the students of Alfred Marshall, and Keynes. When I wrote the statement “Almost every economist…” I was thinking, as you point out, about the German historical school, as well as the deeply interesting (and largely unwritten) history of American political economy and economics and its connections with various emerging disciplines, in which numerous economists- Franklin Giddins, William Ripley, Richard Ely- were sociologists, economists, geographers, and ethnologists, deeply concerned with the course of civilization.

I also had in mind not only Smith but Dugald Stewart, Nassau William Senior, Émile Louis Victor Laveleye, the French socialist political economists (August Bebel,) and some long forgotten American economists, e.g. Francis Wayland. None of these individuals have the reputation of Mill or Marx, but I would argue for their importance nonetheless.

While my statement is more or less false for economists after Marshall, in the twentieth century, political scientists, sociologists, and anthropologists, talked in great -sometimes in maddening detail- about economic individualism, the role of culture in economic transactions, the costs of industrialization, and the problem of progress and civilization.

In the twentieth century, numerous modernization theorists, political scientists- Lucien Pye, Rostow- had very “enlightened” conceptions of economic modernity and the primitive economy. Anthropologists, Raymond Firth, Boas, Marcel Mauss, Levi-Strauss, took up talking about economics, much as their nineteenth century predecessors did, and attached it to deep assumptions about the course of civilization. There’s also the formalist substantivist debate with Polanyi et all.

So when discussing economists-and this is an unfortunate slippage- I really mean, theorists who discuss economic matters. In this sense, I’m guilty of the assumption that there are few useful distinctions around disciplines, only topics and concerns.

My focus on topics, Ely on socialism or Bryce on the American mind, and in being blatantly ahistorical and monolithic has two justifications, neither of which I have completely worked out. The first is broadening the canon, of rediscovering the vast network of individuals in the nineteenth and early twentieth centuries, who though famous in their own day, are now forgotten or relegated to footnotes. The second is the more methodological problem of arguing for the relevance of long-forgotten or heterodox theorists. I can talk about obscure or forgotten figures (and do it quickly) if I relate them to more well-known social theorists who have also discussed the topic. This amounts to a reintroduction of a forgotten social theorist to a more general, perhaps skeptical audience.

The problem of relevance is why I tie almost every figure I write about on the blog to the “big four” sociologists: Tocqueville, Marx, Weber, or Durkheim, and why I mix theorists from different disciplines. I’m actually quite sensitive to taking figures out of their historical context. At heart I’d much rather write in the vein of J.G.A. Pocock, Collini, or Skinner. Once the broad strokes are filled in – the ‘who’ and the ‘why should this matter?’- I can begin writing in the vein of how you suggested with Henry Maine. In fact, after a post on British anthropologist R.R. Marett, I do intend to write on Maine and comparative historical jurisprudence, which, like a post on the anthropologist Mary Douglas, I’ve been trying to write for almost a year.

Again, thank you for the comment. Its good to have readers of your perception and knowledge.

3. simon - September 2, 2011

Christopher,

Thanks for the clarifications, which have given me pause for thought. You write:

“So when discussing economists … I really mean, theorists who discuss economic matters. In this sense, I’m guilty of the assumption that there are few useful distinctions around disciplines, only topics and concerns.”

I would not wish to exactly criticize your assumption here. Our age is in many ways intellectually over-specialized and the perspective of the historian of ideas can (and should) offer a useful corrective to this. On the other hand, I feel a vague unease here because I suspect that the advent of disciplinary divisions may well have complicated the historical treatment of the topics and concerns.

Disciplinary boundaries from Adam Smith through to the early Marshall and aged Marx are either non-existent or porous. Hence, in this period a writer on political economy is unlikely to be ignorant of the general tendencies of historical thought, and vice versa, and so there is unlikely to be much of a gap between ‘economists’ on the one hand, and ‘theorists who discuss economic matters’ on the other. Which is not to say, of course, that there are not a whole host of historical puzzles here – to give but one example: what is the relationship between the writings of JS Mill and George Grote. Nevertheless, it is evident that changing historical ideas as to, say, the nature of early agricultural life, were absorbed by – and also impacted the wider economic thought of – Smith, Marx and Marshall.

In the C20th, however, high walls separate the discipline of economics from other social sciences and humanities. Thus, while you are undoubtedly correct that anthropologists, archaeologists, and many other theorists have ‘discussed economic matters’ for much of the C20th, I cannot but wonder if the economic ideas that they have discussed have themselves actually belonged to the C19th. That is to say, these theorists more often than not appear quite ignorant of C20th developments in economic thought while, while at the same time economists remain unaware and unconcerned by the latest developments in, say, our knowledge of the origins of farming.

To give but one brief concrete illustration: you mention the ‘formalist substantivist debate with Polanyi et all’. In its C19th incarnation (most famously Buecher versus Meyer) this debate was conducted in part by economists and its conclusions were assimilated by many economists. In its C20th incarnation this debate is still taught today in, for example, Classics PhD programs (here Moses Finley versus Cohen on Athenian Banking), yet I would be extremely surprised if any economics PhD students have ever heard of this issue.

My point (I think – I am still trying to work this out) is simply that part of the story that surely needs to be told here (i.e. in a general intellectual history that sees over disciplinary walls) involves the construction of the disciplinary walls and the ways in which they subsequently worked to confine debate and foster a high degree of mutual ignorance on the part of both ‘economists’ and ‘theorists who discuss economic matters’.

Or, to put the whole point another way: how can it even make sense that while the transformation of historical knowledge over the course of the C19th had a profound impact upon the economic thought of a good number of political economists (contrast, say, Smith with both Marx and Marshall) the subsequent – no less profound – transformations in historical knowledge (particularly of prehistory) of the C20th would appear to have had absolutely zero impact upon economic thought?

Simon

4. Christopher Donohue - September 6, 2011

Simon,
Thank you for your response. I must admit your formulation of the interaction between historical knowledge and 19th century economic thought is a much better summation of one of the central issues of my writing. Your argument concerning 20th century anthropologists and the longevity of 19th century economic ideas is especially useful as well. I plan to write a number of posts on the history of the social sciences in the long 19th century and would very much appreciate further critique and dialogue.

Christopher

5. simon - September 7, 2011

Hi Christopher,

It would be a great pleasure to continue to read – and ponder upon – your posts. Discovering your blog entries has been a major event for me. I’ve been getting more and more interested in the history and economic nexus for several years now and, until I randomly bumped into your posts, thought I was pretty much alone in this particular part of the intellectual cosmos. What you write here has much to teach me, not least because you are much better versed than I in C20th developments (my own reading has hitherto been pretty much confined to C19th intellectual history and some smatterings of the Scottish Enlightenment).

Also, please feel free to email me (for example, if you would like me to engage in a more systematic way with any particular text) – I assume you can access my email from these replies.

Simon

6. simon - September 26, 2011

Hi Christopher,

You wrote in a reply above:

I also had in mind not only Smith but Dugald Stewart, Nassau William Senior, Émile Louis Victor Laveleye, the French socialist political economists (August Bebel,) and some long forgotten American economists, e.g. Francis Wayland.

Would you be so kind as to direct me to the relevant work and passages in Nassau Senior?

Thanks,

Simon

Christopher Donohue - September 28, 2011

Hi Simon,

My apologies for the delay in response. Senior has a very interesting, if brief, note situated within a discussion of value, of the emergence of taste and the effects of opulence from the savage state forward. This is in his Political Economy (1854, Richard Griffin, pg. 11ff.) His discussion of the savage state or uncivilized nations and the progress of civilization is an important element in his discussion of Malthus’ writings on population(Political Economy, pg.31ff.)

Senior also has fascinating discussion of the role of “abstinence,” choosing not to gratify immediate desires, and the development of capital and technology throughout history (Political Economy, 67ff, beginning with the “Use of Implements.”) This is a meaty discussion, in my opinion. Has it been noticed by other scholars?

Christopher

7. Simon - September 28, 2011

Many thanks!

As to your question, I assume not, but really, I simply do not know. My general sense is that (i) Senior is on the whole overlooked by everyone (I mean by both historians of political economy and general intellectual historians) and that (ii) nobody expects to find any history in classical political economy from Ricardo onwards, so nobody looks for it let alone discusses it. But on all of this I could be very wrong, and am in general ignorant about both Senior himself and scholarship on him (although I will now chase up your references…)

The person who would know about this (if anybody does), would be Donald Winch.


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