Richard Ely on Industrial Civilization and Socialism

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.