Free Market Economics: A Basic Reader
Economic History
Mary G. Lacy
The man, or class of men, who controls the supply of essential foods is in possession of the supreme power. The safeguarding of the food supply has therefore been the concern of governments since they have been in existence. They had to exercise this control in order to hold the supreme power, because all the people need food and it is the only commodity of which this is true.
Egypt, 2830 B.C.
As far back as the fifth dynasty in Egypt, which historians place at 2830 B.C. at the latest, there was inscribed on the tomb of the Monarch Henku: “I was lord and overseer of southern grain in this nome.”
“When famine came, the multitude, sorely oppressed, repaired in crowds to the stores and magazines of the king. The situation of the poorer and common sort was piteous beyond description; for having laid in but a very scanty store, and not being able to obtain a supply without ready money, when that was exhausted, they were reduced to the necessity of exchanging their cattle, slaves, lands, nay their last little all, to procure grain from the king’s granaries to protract a needy miserable life. When by these means they became totally destitute, they were abandoned to a desolate world, that the king might secure their bartered possessions . . . But when at length the river overflowed, watered the earth, revived dropping nature, and produced a fertile aspect, Joseph made the tour of the kingdom, and summoning his respective landholders, restored to them such parts as they had sold to the king, on condition of their paying a fifth, as tribute to him by virtue of his prerogative, and then enjoined them to the same diligence in their improvements, as if they were to derive the emoluments resulting from the whole. Transported at the returning prospect of plenty, and the restitution of their landed property, the people applied themselves to agriculture with unremitting assiduity; so that by this well-timed act of policy, Joseph established his own authority in Egypt, and increased the standing revenue of all its succeeding monarchs.”
China, 424-387 B.C.
In his study entitled, “The Economic Principles of Confucius and His School,” Dr. Chen tells us that in China (6) it was recognized from very early times that—
“ . . . there are two sets of interests, those of producers and those of consumers. But nothing more markedly affects the interests of both sides at once than prices. Therefore, price is the great problem for society as a whole. According to the Con-fucian theory, the government should level prices by the adjustment of demand and supply, in order to guarantee the cost of the producer and satisfy the wants of the consumer.
“Its chief aim is to destroy all monopoly so that the independent or small producer can be protected on the one side, and the consumer on the other. It prevents the middleman from making large profits, and gives the seller and buyer full gain.” “It is the task of the superior man to adjust demand and supply so as to keep prices on a level.”
The means used by the Chinese government to this end are of the greatest interest, because of the economic principles involved and also because of their antiquity.
“When Li K’o became the minister of Wei he said that if the price of grain were too high, it would hurt the consumers, and that if it were too low, it would hurt the farmers. If the consumers were hurt, the people would emigrate, and if the farmers were hurt, the state would be poor. The bad results of a high price and a low price are the same. Therefore, a good statesman would keep the people from injury and give more encouragement to the farmers.”
After describing the bad condition of the farmers, he gives the following for equalizing the price of grain:
“Those who want to equalize the price of grain must be careful to look at the crop. There are three grades of good crops: The first, the second, and the lowest. In an ordinary year one hundred acres of land yield one hundred fifty bushels of grain.” In the first grade of good crop the amount is fourfold—that is, one hundred acres yield six hundred bushels. Throughout one year, a family of five persons needs two hundred bushels for their living, so that they have a surplus of four hundred bushels. The government should buy three hundred bushels from them, leaving them a surplus of one hundred bushels. In the second grade of good crop, the amount of grain is threefold—that is, one hundred acres yield four hundred fifty bushels. The family would then have a surplus of three hundred bushels. The government should buy two hundred bushels, leaving them one hundred bushels. In the lowest grade of good crop, the amount is twofold—that is, three hundred bushels. The family would then have a surplus of one hundred bushels. The government should buy fifty bushels and leave them the other half. The purchase of the government is for the purpose of limiting the supply according to the amount demanded by the people, and it should be stopped when the price is normal. This policy will prevent the price of grain from falling below the normal and keep the farmers from injury.
“There are also three grades of famine: the great famine, the middle famine, and the small famine. During the small famine one hundred acres yield two-thirds as much grain as in the ordinary year— that is, one hundred bushels. The government should then sell at the normal price what it has bought in the lowest grade of good crop. During the middle famine, the hundred acres yield one-half as much grain as in an ordinary year—that is seventy bushels. The government should now sell what it has bought in the second grade of good crop. During the great famine the amount of grain is only one-fifth of what it is in an ordinary year— that is thirty bushels. The government should sell what it has bought in the first grade of good crop. Therefore, even if famine, flood, and drought should occur, the price of grain would not be high, and the people would not be obliged to emigrate. This would come about because the government takes the surplus of good crops to fill the insufficiency of bad years. In other words, the government controls the excess of supply in a good year in order to meet the demand in a bad year.
“The Policy of Li K’o is for the benefit of both society as a whole and the agricultural class . . . when his scheme was carried out in Wei, he not only made the people rich, but also made the state strong.”
The principle of adjusting the supply and demand of grain is found also in the writing of Mencius, who lived 372-289 B.C. Dr. Chen quotes him as saying to King Hui of Laing:
“When the grain is so abundant that the dogs and swine eat the food of man, you do not make any collection for storage. When there are people dying from famine on the roads, you do not issue the stores of your granaries for them. When people thus die, and you say, ‘It is not owing to me; it is owing to the year,’ in what does this differ from stabbing a man and killing him, and then saying, ‘It was not I; it was the weapon?”
The starving millions of China during 1921 might well have wished for so statesmanlike an advocate in the councils of their government as this fearless economist three hundred years before the Christian era. Dr. Chen proceeds to say:
“The principle of equalizing the price of grain advocated by Li K’o and Mencius was adopted into the system of ‘constantly normal granary.’ During the reign of Han Hsuan Ti, when there were good crops for many years, the price of one bushel of grain was as low as five pennies. Then the farmers suffered greatly. In 498 (54 B.C.) Keng Shou-ch’ang proposed that the government should buy grain from places near the capital instead of transporting it from the eastern provinces. According to the old custom of the Han dynasty, the government transported annually from the eastern provinces four million bushels of grain to supply the capital, which was in the province of Shensi, in northwestern China. As this transportation was by means of the waterway, the number of laborers amounted to sixty thousand. By the plan of Keng Shou-ch’ang, which was approved and carried out by the emperor, the government saved more than half the expenses of transportation, and the farmers got more profit. Then Keng Shou-ch’ang proposed that all the provinces along the boundary of the empire should establish granaries. When the price of grain was low, they should buy it at the normal price, higher than the market price, in order to profit the farmers.”
Dr. Chen points out that equalization of the price of grain is a very beneficial and practical scheme. It benefits the people without cost to the state. When the price is too low, though the government buys the grain at a price higher than the market rate, this does not mean a waste to the government. When the price is too high, though the government sells the grain at a price lower than the market rate, it does not mean a loss to the government. Even if it should be an expense to the government, the social benefit is much greater than the public expense. On the contrary, as a matter of fact, the system has been more than once administered so as to make money for the government.
The few criticisms which have been made of it are shown by Dr. Chen “. . . To be the results not of the original law itself, but of the administration of man. The chief difficulty in administering it is that it is not easy for officials to undertake commercial functions along with political duties.”
Athens, 404-337 B.C.
Xenophen (2) tells us that in Athens a knowledge of the grain business was considered one of the qualities of a statesman. This was probably because Attica needed a considerable importation of grain, as the country did not produce a sufficient amount for its needs. It was brought to market in the Piraeus from all quarters, from Pontus, Thrace,
“The exportation of grain was absolutely prohibited. It was required by law that two-thirds of the grain which came from a foreign country to the Attic emporium should be brought into the city; that is, only a third of the grain brought into the emporium in the Piraeus could be exported from it to other lands. The execution of this law was committed to the overseers of the emporium.
“In order to prevent as much as possible the accumulation of grain and the withholding it from sale, forestalling it was confined within very narrow bounds. It was not allowed to buy at one time more than fifty backloads. (About 75 bushels.) The transgression of this law was punished with death. The grain dealers were also not permitted to sell the medimnus of grain at a higher price than one obulus (three cents) more than they had paid for it. These dealers, who were commonly aliens under the protection of the state, enhanced the price, notwithstanding by overbidding others in the purchase of grain in time of scarcity, and they often sold it the same day on which they purchased it at an advance of a drachma (17.1 cents) on the medimnus. Lysias cannot relate particulars enough respecting the profligacy of these extortioners. They were hated full as much as the same class in modern times . . . ‘Were they not menaced with the punishment of death,’ said he, ‘they would hardly be endurable.’ While the Ageranomi (market masters) had the superintendence of the sale of all other commodities, the state, in order to prevent the extortion of the grain dealers, appointed a particular body of officers called the Sitephylaces (grain inspectors) to have the oversight of this single business . . . They kept accounts of the grain imported, and besides the oversight of grain, they had also the inspection of meal and bread, that they might be sold according to legal weight and price.”
The Oration against the grain dealers delivered by Lysias (19) about 387 B.C., is of the greatest interest because of the light it throws on the speculative practices of the grain dealers in Athens, the great wheat market of the eastern Mediterranean, and the attempts of an harrassed government to control them. From it we glean that in spite of the rigorous laws which were in force regulating the traffic in grain, that “comers” were not uncommon. He wrote:
“For when you happen to be most in want of grain, they grab it and are unwilling to sell, and you may be well satisfied to buy from them at any price whatever and take your leave of them so that sometimes when there is peace we are reduced to a state of siege by them.”
“Ofttimes you imposed upon them, citizens though they were, the most severe penalties, because they were unable to master the scoundrel-ism of these dealers. What then should the malefactors themselves suffer at your hands, when you even put to death those who are not able to maintain a watch over them?”
We learn further that there were “combinations in restraint of trade” at this early date nearly four centuries before the Christian era, for Lysias says:
“For if you shall find them guiltless when they themselves admit that they made a combination against the importers, you will seem to plot against the skippers who came here.”
We also learn that the results of even the most severe punishments, unaccompanied by any constructive substitute for the forbidden practices, were highly unsatisfactory, for Lysias says:
“But it is necessary, gentlemen of the jury, to chastise them not only for the sake of the past, but also as an example for the future; for as things now are they will be hardly endurable. And consider that in consequence of this vocation very many already have stood trial for their life; and so great are the emoluments which they derive from it that they prefer to risk their life every day rather than to cease to draw from you unjust profits. And indeed not even if they entreat you and supplicate, would you justly pity them, but much more rather the citizens who perished on account of their wickedness, and the importers against whom they made a combination . . . If then you shall condemn them, you shall act justly and you will buy grain cheaper; otherwise, dearer.”
Rome, 301-361 A.D.
Rome, not having had the foresight to prevent it, found herself confronted at the close of the third century of the Christian era with a condition of high prices which was very menacing. Diocletian, with characteristic vigor, proceeded to correct this condition by law and issued his famous Edict (20) in 301 A.D., Abbott (1) tells us:
“In his effort to bring prices down to what he considered a normal level, Diocletian did not content himself with such half measures as we are trying in our attempts to suppress combinations in restraint of trade, but he boldly fixed the maximum prices at which beef, grain, eggs, clothing, and other articles should be sold and prescribed the penalty of death for anyone who disposed of his wares at a higher figure.”
Prices are specified for between seven and eight hundred different items—practically all the articles which his subjects would have occasion to buy. Wages also are fixed—teachers, advocates, bricklayers, tailors, weavers, physicians—all are included. “The carpenter and joiner are paid by the day, the teacher by the month, the knife grinder, the tailor, the barber by the piece, and the coppersmith according to the amount of metal which he uses.” Abbott calls attention to the fact that the prices given in the Edict are not normal but maximum. As the prevailing prices were so high, however, it is not probable that the maximum prices differed very greatly from them. The net result was failure and the law had to be repealed because of its impotence in correcting the condition of affairs. Lactan-tius (17) in 314 A.D. writes as follows of Diocletian and his Edict:
“After that the many oppressions which he put in practice had brought a general dearth upon the empire, then he set himself to regulate the prices of all vendible things. There was also much blood shed upon very slight and trifling accounts; and the people brought provisions no more to markets, since they could not get a reasonable price for them and this increased the dearth so much, that at last after many had died by it, the law itself was laid aside.”
The historian Gibbon (13) tells us that sixty years after Diocletian’s effort to control the cost of living by fixing prices, the Emperor Julian made a similar attempt, with no greater success. He writes:
“The inclemency of the season had affected the harvests of Syria; and the price of bread in the markets of Antioch had naturally risen in proportion to the scarcity of com. But the fair and reasonable proportion was soon violated by the rapacious arts of monopoly. In this unequal contest, in which the produce of the land is claimed by one party as his exclusive property; is used by another as a lucrative object of trade; and is required by a third for the daily and necessary support of life; all the profits of the intermediate agents are accumulated on the head of the defenseless consumers . . . When the luxurious citizens of Antioch complained of the high price of poultry and fish, Julian publicly declared that a frugal city ought to be satisfied with a regular supply of wine, oil, and bread; but he acknowledged that it was the duty of a sovereign to provide for the subsistence of his people. With this salutary view, the emperor ventured on a very dangerous and doubtful step, of fixing, by legal authority, the value of corn. He enacted that, in a time of scarcity it should be sold at a price which had seldom been known in the most plentiful years; and that his own example might strengthen his laws, he sent into the market four hundred and twenty-two moddi, or measures, which were drawn by his order from the granaries of Hierapolis, of Chalcis, and even of Egypt. The consequences might have been foreseen and were soon felt. The imperial wheat was purchased by the rich merchants, the proprietors of land, or of com, withheld from that city the accustomed supply, and the small quantities that appeared in the market were secretly sold at an advanced and illegal price.”
Thus ended Julian’s attempt to fix prices arbitrarily. It should be noted that both in the case of Diocletian and Julian the effect of the price fixing was the withholding from the market of the needed food, making necessary the abrogation of the laws by which the prices were fixed.
Litman (18) in his “Prices and Price Control in Great Britain and the U.S. During the World War” tells us that:
“An attempt to control both the wholesale and the retail price of wine by fixing a maximum was made by the British Government in 1199. The measure failed and in 1330, after a long period of ineffectiveness, a new law was passed which required the merchants to sell at a ‘reasonable’ price, the latter to be based on import price, plus expenses. This new measure of control proved as futile as the old one.
“The first attempt to regulate the price of wheat and bread was made in 1202. The most important ordinance on the matter was by Henry III. This ordinance fixed changing weights for the farthing loaf to correspond to six penny varieties in the price of the quarter of wheat from 12 pence to 12 shillings. The law was enforced locally on sundry occasions, but fell gradually into disuse.”
Not until 1815, however, were the last laws fixing the prices of bread repealed, after a continuous existence of five and a half centuries. The official document (14) recommending their repeal enumerates the ways in which these laws have worked out to show that their repeal is in the interest of the public welfare.
Belgium, 1584-85
John Fiske (11) in one of his essays ascribes the downfall of the city of Antwerp in 1585 to the bungling price-fixing legislation of the Government. He says:
“The turning point of the great Dutch revolution, so far as it concerned the provinces which now constitute Belgium, was the famous siege and capture of Antwerp. The siege was long and the resistance obstinate and the city would probably not have been captured if famine had not come to the assistance of the besiegers. It is interesting to inquire what steps the civic authorities had taken to prevent such a calamity. Finding that speculators were accumulating and hoarding up provisions in anticipation of a season of high prices, they affixed a very low maximum price to everything which could be eaten, and prescribed severe penalties for all who should attempt to take more than the sum by law decreed. The consequences of this policy were twofold. It was a long time before the Duke of Parma, who was besieging the city, succeeded in so blockading the Scheldt as to prevent ships laden with eatables from coming in below. Com and preserved meats might have been hurried into the beleagured city by thousands of tons. But no merchant would run the risk of having his ships sunk by the Duke’s batteries merely for the sake of finding a market no better than many others which could be reached with no risk at all. The business of Government is to legislate for men as they are, not as it is supposed they ought to be. If provisions had brought a high price in Antwerp, they would have been carried thither. As it was the city by its own stupidity blockaded itself far more effectually than the Duke of Parma could have done.
“In the second place the enforced lowness of prices prevented any general retrenchment on the part of the citizens. Nobody felt it necessary to economize. So the city lived in high spirits until all at once provisions gave out and the Government had to step in again to palliate the distress which it had wrought.
“In this way a bungling act of legislation helped to decide for the worse a campaign which involved the territorial integrity and future welfare of what might have become a great nation performing a valuable function in the system of European communities.”
India, 1770 and 1866
The famines of India are prominent features in her history. William Hunter (15) in his remarkable book entitled, “Annals of Rural Bengal,” writes:
“Lower Bengal gathers in three harvests each year; in the spring, in the early autumn, and in December, the last being the great rice crop, the harvest on which the sustenance of the people depends. The December crop failed utterly in 1770 and fully a third of the population died. This disaster stands out in the contemporary records in appalling proportions. It forms, indeed, the key to the history of Bengal during the succeeding forty years.
“In 1770 the Government by interdicting what it was pleased to term the monopoly of grain, prevented prices from rising at once to their natural rates. The province had a certain amount of food in it and this food had to last nine months. Private enterprise if left to itself would have stored up the general supply at the harvest with a view to realizing a larger profit at a later period in the scarcity.
“Prices would in consequence have immediately risen, compelling the population to reduce their consumption from the very beginning of the dearth. The general stock would thus have been husbanded and the pressure equally spread over the whole nine months instead of being concentrated upon the last six. Instead of this the Government in 1770 prohibited under penalties all speculation in rice. A government which, in a season of high prices, does anything to check speculation acts about as sagely as the skipper of a wrecked vessel who should refuse to put his crew upon half rations.
“Very different was the procedure of the Government at the time of the famine of 1866. Far from trying to check speculation, as in 1770, the Government did all in its power to stimulate it. In the earlier famine one could hardly engage in the grain trade without becoming amenable to the law. In 1866 respectable men in vast numbers went into the trade; for the Government, by publishing weekly returns of the rates in every district, rendered the traffic both easy and safe. Everyone knew where to buy grain cheapest and where to sell it dearest and food was accordingly bought from the districts which could best spare it and carried to those which most urgently needed it.
“In 1770 the price of grain, in place of promptly rising to three half-pence a pound, as in 1865-66, continued at three farthings during the earlier months of the famine. During the latter months it advanced to two pence, and in certain localities reached four pence.”
Colonial U.S., 1633-1779
Passing now to the eighteenth century some observations will not be amiss on the price-fixing measures resorted to in our country during Colonial days and the early years of the Republic, and also in France during the tragic period of the French Revolution.
Both of these periods have been so ably described that little seems necessary except to give the reference to the literature. Winthrop (24) tells us, in 1633:
“The scarcity of workmen has caused them to raise their wages to an excessive rate, so as a carpenter would have three shillings the day, a laborer two shillings and six pence, etc.; and, accordingly those who had commodities to sell, advanced their prices sometimes double to that they cost in England, so as it grew to a general complaint, which the court, taking knowledge of, as also of some further evils, which were sprung out of the excessive rates of wages, they made an order that carpenters, masons, etc., should take but two shillings the day, and laborers but eighteen pence, and that no commodity should be sold at above four pence in the shilling more than it cost for ready money in England; oil, wine, etc., and cheese, in regard to the hazard of bringing, etc. (excepted).”
Bolles (3) gives an excellent account of the experiment of price fixing in the early years of the United States in the attempt to stop the rise in price of the necessities of life, caused by the declining value of the continental paper currency.
Pelatiah Webster (21) discusses the legal limitation of prices with vigor and lucidity and shows by resistless logic that such legislation defeats its own end in several ways, the most important of which is the withholding of commodities from the market which it inevitably produces.
On December 20, 1777, Sir Henry Clinton, in charge of the British forces occupying New York, made a proclamation (7) as follows:
“Whereas it is consonant not only to the common principles of humanity but to the wisdom and policy of all well regulated states, in certain exigencies, to guard against the extortion of individuals, who raise the necessaries of life, without which other parts of the community can not subsist; and whereas the farmers in Long Island and Staten Island, are possessed of great quantities of wheat, rye, and Indian com for sale beyond what they want for their own consumption; and it is highly unreasonable that those who may stand in need of those articles, should be left at the mercy of the farmer; and whereas it is equally just and reasonable that every encouragement should be given to the industry of the husbandman, and that in all public regulations respecting the price of the produce of his lands, regard should be had to that of the conveniences which he is obliged to purchase, and whereas the present rates at which wheat, flour, rye meal, and Indian meal are sold, do vastly exceed in proportion the advance price of those articles which the farmer stands in need of purchasing, and I being well satisfied, from the best information, and most accurate estimates, that the following prices upon the articles above mentioned will be liberal and generous, have thought it fit to issue this Proclamation, and do hereby order and direct, that the prices to be hereafter demanded for the said articles shall not exceed the following rates, viz.:
“A bushel of wheat, weighing fifty-eight pounds, twelve shillings, with an allowance or deduction in proportion for a greater or lesser weight. A bushel of rye or Indian com, seven shillings,” etc.
The proclamation proceeds to state that the farmer shall declare how much grain he has and if he presumes to sell for a higher price than the one stipulated or “refuse to sell the same at those prices, shall be subject to have his whole crop of grain, or quantity of flour or meal, concerning which such offence shall happen, seized and confiscated, and himself liable to imprisonment for such offense.”
Davis (8) in his able and comprehensive treatment of limitation of prices in Massachusetts, gives much information relating to this subject in the other states also. Felt (10) gives extracts from the text of the “Act to prevent monopoly and oppression.” He also gives the actual prices set for the various commodities, and in appendix 2 gives “Prices of grain, etc., appointed by the general court and taken as currency.” These prices are of much interest as they go back to 1642 and were legal tender at that time.
Weeden (22) writes in his “Economic and Social History of New England, 1620-1789”:
“The colonial history of the United States affords many instances of the failure of fixed prices to remedy the evils they were designed to cure. The governor and council of New England fixed the price of beaver at 6s in fair exchange for English goods at 30 per cent profit, with the freight added. The scarcity of com which was selling at 10s ‘the strike’ led to the prohibition of its sale to the Indians. Under the pressure of this prohibition the price of beaver advanced to 10s and 20s per pound, the natives having refused to part with beaver unless given com. The court was obliged to remove the fixed rate and the price which ruled was 20s. An equally fruitless attempt was made to regulate the price of labor. These regulations were inforced for about six months and then were repealed.”
France, 1789-1793
As regards the limitation of prices in France during the Revolution, there seems nothing to add to Bourne’s (4) discussion of this subject in the “Journal of Political Economy” for February and March, 1919. We cannot fail to note, however, that the system failed signally in France as elsewhere because supplies were withheld from the markets. The producers could not be forced to declare what they had and without this knowledge the Government could not prosecute for withholding them. Bourne writes:
“The arguments in the convention relative to the matter ran the whole gamut from the principles of economic liberty advocated by the economists of the day to the radical abstractions of Robespierre and his followers, who swept commerce aside by maintaining that ‘the food necessary to man is sacred as life itself,’ and ‘The fruits of the earth like the atmosphere belong to all men.’
“One of the most interesting of the many suggestions made in the convention was that of Barbaroux who advocated ‘a plan to form local associations to collect and circulate information about the crops. In other words, for coercion he would substitute cooperation, believing that the French citizens, farmers and merchants included, would not turn a deaf ear to an appeal for common action against the oncoming peril’ (famine). Price fixing finally became one of the characteristic features of the Reign of Terror, and when Robespierre and his councilors passed through the streets of Paris in the carts of the executioners the mob jeered saying, ‘There goes the dirty maximum.’ ”
Summary
The history of government limitation of price seems to teach one clear lesson: That in attempting to ease the burdens of the people in a time of high prices by artificially setting a limit to them, the people are not relieved but only exchange one set of ills for another which is greater. Among these ills are (1) the withholding of goods from the market, because consumers being in the majority, price fixing is usually in their interest; (2) the dividing of the community into two hostile camps, one only of which considers that the government acts in its interest; (3) the practical difficulties of enforcing such limitation in prices which in the very nature of the case requires the cooperation of both producer and consumer to make it effective.
Egypt took entire control of the grain trade and saved the people from starvation, but took over the land in return.
China worked out a system of control of supply and demand which kept prices normal. She seems to have been the only country which recognized the whole price question as being a symptom and not the disease itself, and because she recognized this fact seems to have come nearer than any other country to solving the problem of supplying the people with the food they needed at a price they could pay.
Athens regulated the grain trade and set prices by legal enactment but found herself unable to enforce them.
Rome made a colossal experiment in controlling prices by legal enactment, but it utterly failed.
Great Britain had on her statute books laws fixing the price of bread continuously for more than 500 years. The price of wheat, fish, and wine was also regulated, but all such laws were abrogated in 1815, because of their failure to accomplish the purpose for which they were designed.
Antwerp was overthrown in 1585, and at least one historian of note declares that price-fixing legislation was largely responsible for its downfall.
India has learned in the hard school of experience that even in times of famine, price fixing is a very dangerous expedient because it removes one of the most powerful checks on consumption; namely, high prices.
The Colonial United States tried the same experiment at various places and times but failed utterly to secure satisfactory results.
Revolutionary France tried the same measures, but the protagonists of the movement perished on the guillotine. The dreary story of France’s efforts to limit prices is distinguished from that of the other countries we have noted because of the proposal of Barbaroux to enlist the aid of both producer and consumer in the effort of the Government to control the food supply in the interest of the people’s welfare. This proposition was not carried out but it furnished the first indication of the goal of cooperation towards which we are still pressing.
List of References
1. Abbott, Frank Frost.
The Common People of Ancient Rome. New York, Scribner, 1911 p. 150-151.
2. Boeckh, August.
The Public Economy of the Athenians . . . Tr. by Anthony Lamb, Boston, Little Brown & Company, 1857. Book 1, chap. 15.
3. Bolles, Albert S.
The Financial History of the United States from 1774-1789. Fourth ed. New York, D. Appleton, 1896, p. 158-173.
4. Bourne, Henry E.
Food Control and Price Fixing in Revolutionary France. (Journal of Political Economy. V. 27, p. 73-94, 108-209. Feb. and March 1919.)
5. Breasted, James Henry.
Ancient Records of Egypt. Chicago, Univ. of Chicago Press, 1906-07, v. 1, p. 126.
6. Chen, Huan-Chang.
The Economic Principles of Confucius and His School, N.Y., Longmans, Green and Co., 1911. (In Columbia Univ. Studies in history, economics, and public law. V. 44 and 45.)
7. Clinton, Sir Henry.
Proclamation Dec. 20, 1777. (In the Remembrancer; or impartial repository of public events. Ed. by John Almon. London [v. 6.] 1778. p. 57-58.)
8. Davis, Andrew McFarland.
The Limitation of Prices in Massachusetts, 1776-1779. (In Colonial society of Massachusetts. Publications v. 10, Boston, 1907. p. 119-134)
9. Erman, Adolph.
Life in Ancient Egypt . . . Tr. by H. M. Tirard. London and N.Y. Macmillan & Co., 1894, p. 107-108, 433-434.
10. Felt, Joseph B.
An Historical Account of Massachusetts Currency. Boston, Perkins, and Marvin, 1839, p. 170-173, 184-185, 242-245.
11. Fiske, John.
The Unseen World and Other Essays. Boston, 1904, p. 20.
12. Genesis XII, 1-10; XLI, 54; XLII, 2.
13. Gibbon, Edward.
The History of the Decline and Fall of the Roman Empire. N.Y. Fred de Fau, 1906, v. 4, p. 111-112.
14. Great Britain, Parliament. House of Commons.
Report from the Committee of the House of Commons on Laws Relating to the Manufacture, Sale, and Assize of Bread. 6 June, 1815.
15. Hunter, William W.
Annals of Rural Bengal. Ed. 7, London, Smith, Elder & Co., 1897.
16. Josephus, Flavius.
History of the Antiquities of the Jews. Ed. by George Henry Mayard, London, C. Cooke, 1789. Bk. 11, Chap. VI & VIII.
17. Lactantius, L.C.F.
A Relation of the Death of the Primitive Persecutors. Written originally in Latin . . . Englished by Gilbert Burnet, D.D. Amsterdam, 1687, p. 67-68.
18. Litman, Simon.
Prices and Price Control in Great Britain and the United States During the World War. N.Y., Oxford Univ. Press, 1920.
19. Lysias.
Against the Grain Dealers. (In eight orations of Lysias. Ed. by Morris H. Morgan. Boston, Ginn & Co., 1895, p. 89-103.) For translation see Botsford, G. W., and E. G. Sihler, Hellenic civilization. N.Y. Columbia Univ. Press, 1915, p. 426430.
20. Mommsen, Theodor.
Corpus in Scriptionum Latinarum. Berloni apud Georgium Reinerum, 1889, v. 3 (Suppl. pt. 1) p. 1926-1953.
21. Webster, Pelatiah.
Political Essays. Philadelphia. Joseph Cruikshank, 1791, p. 11-18.
22. Weeden, William B.
Economic and Social History of New England, 1620-1789. Houghton, Boston, 1890.
23. Wilkinson, J. Gardner.
The Manners and Customs of the Ancient Egyptians. London. John Murray, 1878, v. 2, p. 378.
24. Winthrop, John.
The History of New England from 1630-1649. Boston Phelps and Famham, 1825, v. 1, p. 116.
Dean Russell
Our political leaders have recently declared war against poverty in the United States. And they are now in the process of mobilizing the nation’s manpower and resources for the coming battle.
The general philosophy behind these recurring governmental campaigns to stop poverty is familiar indeed to students of economic history. As merely one of countless possible examples on the same general theme, let us first look briefly at the so-called Industrial Revolution in the England of 150 years or so ago.
Perhaps the two most famous of the reformers of that era were the classical economist, Karl Marx, and the successful businessman who became his collaborator, Friedrich Engels. Those two men were the intellectual leaders of the war against poverty in their time. And as is still the case with most of our own intellectual and political leaders today, the only solution that Marx and Engels ever offered to end poverty was to have the government increase its compulsions and prohibitions over the people in their economic activities.
It is not necessary here to question the accuracy of those reports by Karl Marx in which he described the degrading living conditions of the people who worked in those early factory towns of industrial Britain. While his research was confined to extensive reading in the British Museum, I will here assume that his statements on the harsh working conditions of that time were essentially true in a reportorial sense. But most unfortunately for poor people everywhere, Marx completely missed both the reality and the portent behind what he was reporting. And thus he offered a totally erroneous solution to the problems of poverty and how to raise the level of living of the general population.
The Socialist Theory
The famous theory endorsed by Karl Marx to improve the well-being of mankind was based firmly on governmental ownership and operation of the means of producing and distributing all goods and services; later on, he appears to have agreed that heavy governmental controls, without total state ownership, might also effectively accomplish the task. That ancient but ever-new theory has been increasing in popularity all over the world, ever since Marx refurbished it again in his program to end poverty by positive governmental action. Under a different name (and with a few changes in nonessentials), that same socialist theory of economics is the inspiration behind the current governmental plans to end poverty in the United States.
Perhaps the best source for a summary of the philosophy and program of Karl Marx is his major book, Das Kapital. As I here list the main points of his theory, I am confident that you will find most of them as familiar as today’s newspaper or political speech or sermon or textbook on economics.
Departure from Classical School
Since Karl Marx was trained in the “classical school” of economics of Adam Smith and David Ricardo, he was well aware that increasing capital accumulation is necessary for increasing industrial growth. And he readily agreed with the classical economists that as capital (machinery) increases, the result will be more and more production of more and more products. So far, so good.
But at this point, Marx deviated from the prevailing economic thought of his time and claimed that the unplanned and uncontrolled production of a free market will result in general surpluses that can’t be sold; that is, the workers won’t have enough purchasing power to buy the products they produce. This development will cause factories to shut down until the surpluses can be disposed of in some manner. Thus, booms will be followed at regular intervals by busts. Throughout the economic ups and downs of these business cycles, however, the rich will get richer and the poor will get poorer, according to Marx. This will continue as long as there is uncontrolled private ownership and production in a market economy that (according to Marx) is necessarily based on increasing monopolies, jungle competition, and anarchic production. The unorganized, oppressed, and politically helpless workers will be exploited mercilessly. Many (perhaps most) of them will lose their jobs to the ever-increasing and more efficient machines. And while the workers who are fortunate enough to have jobs will increase their production, they will be paid lower wages than before.
Marx predicted categorically that widespread poverty, mass starvation, and death among the working classes are the inevitable results of capital formation and industrialization in a market (nonsocialist) economy of private ownership. His financial backer and literary collaborator, Friedrich Engels, said much the same thing in his book, The Condition of the Working Classes in England in 1844. For example, he claimed that the peasants and their children in agrarian England were far healthier, happier, and more prosperous than the workers of industrial England after 1700 and the advent of machinery for mass production.
Trimming the Facts To Fit the Theory
One of the most astounding facts of economic history is this: At the time that Marx and Engels formulated and published their theory, the statistical proof of its falseness was publicly available. Further, both Marx and Engels were aware of this evidence; one can only assume that they simply ignored it because it did not fit into their theory.
Here are the statistics referred to—the population figures for England and Wales from 1600 through 1831, figures that Karl Marx could not possibly have missed during his years of extensive research in this general area.
| Year | Population |
| 1600 | around 5 million* |
| 1700 | more than 5 million* |
| 1750 | more than 6 million* |
| 1801 | 9 million (census) |
| 1820 | 12 million (census) |
| 1831 | 16 million (census) |
| *Rough estimate | |
Among the voluminous statistics of this same type that were available to Marx and Engels, one also finds this: In London in 1750, about 70 per cent of all children died before age five; by 1830, the figure had fallen below 30 per cent.
If the theories of economics and history advanced by Karl Marx were valid, these population figures would have to be the reverse of what they are. If there were any merit at all to the theory of socialism, children would have died earlier (and the population would have diminished) as the number of machines increased in Great Britain from 1700 to 1900 in an increasingly free market.
But the truth of the matter is, of course, the reverse. As industrialization in the competitive market economy grew, the life expectancy of children (and also of adults) grew right along with it. The population had been barely moving forward for two or three hundred years in an agrarian economy with few machines. But with increasing machinery—and especially the invention of the steam engine and the rapid industrialization that followed it—the population soon doubled, and then trebled.
One should also remember that it was during this period that hundreds-of-thousands of British subjects were migrating to all parts of the world.
Thus, the statistics on population growth given above are really understated.
The reason that the evidence is contrary to socialist theory is simply because (basically) socialist theories of economics and history were (and still are) totally false. But before we examine the validity of that sweeping condemnation, let us mention two possibilities other than machines in a market economy that might explain this increase in life expectancy.
Was it due to new medical knowledge and practices? No, for the most part, those improvements came after the machines, not before.
Was it due to more governmental controls and welfare schemes? No, governmental interferences in the economy were decreasing during this period. Percentagewise, there was less government welfare instead of more. The economy was becoming increasingly free.
A False Theory
At this point, however, I would like to agree with Marx on one of his ideas—that is, before one can understand history, he must first have some understanding of economic theory. Economics is certainly not the sole determinant of history, as Marx claimed it to be. But at least it is important enough to explain the nonsense that is so often encountered in the deductions of historians who have no real understanding of economic theory. The misinterpretation of history by the socialist philosophers, however, was, of course, not due to the absence of economic theory but rather to the endorsement of false theory.
A Better Theory Proposed
Since it is obvious that the socialist theories of history and economics do not fit the facts of the Industrial Revolution, and are thus false, then what theory does explain this period of fantastic economic growth? Well, here is my own theory, in four simple parts. Let us see if it helps in any way to explain the facts:
1. Persons who have enough to eat will live longer than persons who don’t have enough to eat. That statement is not intended to be humorous; actually, it is an oft-ignored fact that is fundamental to any economic theory that explains why human beings act as they do. And I am reasonably confident that Karl Marx would have agreed with it.
2. Other things being equal, a man with a wheelbarrow and shovel can move more dirt from “hither to yon” than can a man using only his hands. That is, a man with a machine can produce more than a man without a machine; or, capital formation increases production. Again, Marx would surely have agreed with me. But on the heart of my theory—the next two points—he would have been in total disagreement.
3. The employee who is working in a factory for wages in a free economy will be paid more if he produces more. I could here use marginal analysis to support the theory. But for my present purpose of simplified explanation, I need only point out this fact: Competition among employers in a free economy will guarantee that result; for since each employer is in business to earn profits, each will try to secure the services of the workers who produce the most in the shortest period of time. The only way this can be done in a free market is to offer higher real wages. If that is not so, then we are faced with the absurd theory that the policy of employers in an economy of choice is to voluntarily pay most to the employees who produce the least.
4. Persons who are producing, selling, and buying what they choose to produce, sell, and buy will have more of what they want than will persons who are compelled to produce, sell, and buy what they don’t want. If that sounds like a mere play on words, it isn’t. For what I have said is that the market economy of free choice (with the government restricted to preserving the peace and suppressing fraud) provides more people with the things they want than does any other economic arrangement. Or expressed in other words: If the objective of an economic system is to provide the maximum amount of goods and services that peaceful persons want, obviously there must be freedom of choice and exchange. This essential requirement for maximum material well-being exists in a free market economy, and only in a free market economy. The socialist theory of a controlled economy (that is, a controlled people) is necessarily based on the idea that when peaceful persons are compelled to produce, sell, and buy what they would not voluntarily produce, sell, and buy, they really have more of what they want than is the case when they are free to choose.
A Priori Reasoning
Well, there you have the nonsocialist theory of economics as best I can state it in brief form. It is, essentially, the exact opposite of the socialist theory. And thus you can now better understand my sweeping statement that the socialist theory of government ownership or control of production and distribution is totally false and must always finally produce the reverse of what its advocates say they wish to accomplish. That is as true in the United States as elsewhere, currently or at any other time.
Now I wish to say two things about this theory. First, of course, I didn’t invent it; I suspect, however, that I have simplified it considerably. Second, the inventors did not first look at the facts and then work out a theory to fit them. That isn’t how theory is developed. For example, the first “sputnik” that circled the earth did not generate a theory; instead, the prior theory generated the first man-made orbit around the earth.
You and I know a priori that a man with a wheelbarrow and shovel can move more earth in a given period of time than can a man without a wheelbarrow and shovel. We don’t need any facts to prove it. The theory is self-evident. The man who invented the wheelbarrow did it because he knew in advance that he could thereby “produce more” with that tool than he could without it. And so it is with the three other a priori theories I have cited above. Since they are unquestionably true, I know that certain results must necessarily follow their application.
I know that as more machines appeared in an increasingly free market in Great Britain after 1700, there would be more food and other goods and services. The people would live longer. And under the conditions of that particular time, the population could be expected to increase rapidly. That economic theory doesn’t really need “statistical proof” since it is self-evident and is based on the fact that every person is well aware that he will live longer with food than without food. The opposing socialist theory is not false merely because the statistics disprove it; the theory is false on a self-evident basis. Since socialist economic theory is false a priori, naturally the results in practice must finally be disastrous. That is why millions of Russians starved to death under the communist economic system after 1918; persons were literally prevented from producing food. It was not due so much to lack of political freedom as it was to the utter nonsense of socialist economic theory; the results could not be otherwise.
And even today, the only reason that the Russian people manage to stay alive at all is because they cheat against their socialist theory. This cheating is on a mammoth scale and, fortunately for the Russian people, it appears to be increasing. The officials permit a tremendous amount of “free enterprise” food growing; they use unrestricted market prices to distribute vast quantities of food and considerable amounts of consumer goods; the managers of factories can now fire inefficient workers and hire ones who produce more; the government planners have rejected the Marxian idea of government unemployment compensation that pays a person not to work; further, make-work schemes that are now protected by law in the United States would result in long prison sentences for persons who openly practiced them in the Soviet Union; the free market prices of the world are used by the socialist planners in Russia to guide their production procedures and goals; the “profit motive” rather than the “firing squad” is now increasingly used as the incentive to get better management and more production; and so on through thousands of free market violations of socialism.
The truth is simple and harsh: If the Russians didn’t cheat against the economic theory on which their system is based, they would all literally starve to death. And even at best, they must still depend on other nations to send them food. It is to be hoped that future leaders in Russia will finally accept fully the fact that persons who have enough to eat will live longer than persons who don’t have enough to eat, and that they will then adopt the policy of leaving persons free to produce the food they want instead of compelling them to produce “moon shots” that they would never produce voluntarily.
The adoption and practice of false economic theory explains why millions of men, women, and children are literally starving and dying in China today. The total economic collapse in Cuba today is not due primarily to the fact that Cuba has a dictator; it is because that dictator operates on socialist economic theory. The present socialist economic system in Cuba can’t possibly work in practice because it is false in theory. It is totally contrary to how all human beings choose to act when they are free to do so.
Some Things Explained
With my own theory cited above, I know in advance that (other things being somewhat equal) the people in a comparatively free economy will have a higher level of living than will the people in a less free economy.
I know that West Germany has to be more prosperous than East Germany. My a priori theory says that it cannot be otherwise. And since the economy in Poland is a little bit more free than the economy in Russia, my theory says that the Poles should be expected to have a slightly higher level of living than the Russians. They do, even though the still-heavy controls over the economy in Poland still mean a distressingly low level of living for the unfortunate Polish people.
My economic theory says that the Japanese in their comparatively free market should have a higher level of living than had the Japanese under the former controlled economy. They do. Further, my theory implies that the economic “growth rate” in Japan should be high. It is; in fact, the rate there appears to be the highest in the world.
With my theory, I can now make some sense out of history, a thing that Karl Marx was never able to do. I now better understand why ancient Athens enjoyed its phenomenal growth rate for 150 years or so. I can now better understand why it declined and collapsed. In each case, the key I search for is the comparative freedom enjoyed by the citizens in the economic areas—that is, the extent of private ownership and of the freedom of persons to exchange goods and services voluntarily.
I now know why a much higher level of living developed in Venezuela than in Brazil in our own era. And I also now understand why the level of living in Venezuela has (percentagewise) not increased as fast during the past few years as it did formerly. I can now also understand the situations in Argentina and India. Finally, I can now understand why the real level of living per capita in my own country is not increasing (percentagewise and on the average) as fast as it used to before 1930 and the general acceptance of the philosophy of the welfare state and the controlled economy. Further, my theory says that the battle plans of the current war against poverty in the United States (more socialism) must eventually bring the reverse of the announced aims.
Well, you pick your own time and place, and examine it from the viewpoints of the two theories here advanced—Marx’s socialist theory of economics and my own free market theory. If other things are reasonably equal, you will always find that (over a significant period of time) the people in the “more free” economy will be more prosperous than the people in the “less free” economy. This is self-evident because free people will always produce more of what they want than will people in a controlled economy who are prevented from choosing what they will produce. It cannot be otherwise.
The size of the country and the extent of its natural resources are not as vital for a high level of living in today’s world as is the economic philosophy endorsed by the nation’s leaders; for example, small and resource-poor Switzerland has a comparatively high level of living. When one considers the amount of foreign capital that goes there—and why it goes there—no one should be surprised at this result. And no one who understands economic theory is in the least surprised at the fantastic “growth rate” of tiny Hong Kong with essentially no natural resources.
Now I would like to end where I started—with the Industrial Revolution. Please note that I have not denied the horrors of that period. I am aware that there were cases of six-year-old children who worked ten hours a day—and that they lived in filth and often suffered injury from those primitive machines. All I have said is that life expectancy for children working in those factories was higher than was the life expectancy of children in the preindustrial society. The children of the Industrial Revolution era had more to eat, even though they still didn’t have enough. They had more to eat because they could produce more with machines than without machines, and could trade their industrial products for more and better food. They still didn’t have all they wanted to eat because they still couldn’t produce enough with the still-primitive machines they had. But as capital accumulated and more and better machines came into existence, they produced more. And thus they had more to eat. And thus they lived longer.
I maintain that living to age nine is better than dying at age five. As more capital was accumulated in an increasingly free market economy, the children lived even longer. Finally there was enough capital available to permit a man to produce enough to put his children into schools, and for his wife to change her factory job for the job of home-keeping. It was machines under private ownership, not child labor laws, that finally took the children permanently out of the factories and put them into schools. If you doubt this, think of what would necessarily happen to children today if there were no machines.
The private accumulation of capital in a free market economy has always meant an increasingly higher level of living. This is what it always will mean. Thus the most practical thing that you and I can do to end poverty in the United States or elsewhere is to insist that the market shall be free. Nothing else is required; anything else will fail.
Percy L. Greaves, Jr.
PART I. Jamestown
Jamestown, the first English settlement in America, was founded on Christianity and communism. The original settlers were forced to use the forms of the State religion in their worship of God. They were lured to the Virginia shores with promises of social security and the abundant life. They were all to be fed and clothed out of a common store.
Fortunately for us, they survived a succession of famines and tyrannies to provide us with a heritage of liberty—liberty to worship God and produce wealth as each of us sees fit without injury to our fellowmen.
In 1606, his Divine Majesty, James I of England, granted the London Company the first Charter rights to settle “alongst the coasts of Virginia.” The “sundry Knights, Gentlemen, Merchants and other Adventurers” were commended to propagate the “Christian religion to such People, as yet live in Darkness and miserable Ignorance of the true Knowledge and Worship of God.”
The original band of 105 men landed in May, 1607, with their “religious and courageous divine,” the Reverend Robert Hunt. One of their first tasks in Jamestown was to arrange a place of worship. This was done by stretching sails between tree trunks for a covering. A board was then nailed between two trees to form a pulpit and reading desk. Captain John Smith later wrote that “our walls were rails of wood, our seats unhewn trees.” This crude affair was soon replaced by a log church. There Mr. Hunt read Church of England services every morning and every evening. He preached twice on Sundays, and held communion at regular intervals. He was always sure of a large congregation.
As commanded in their Charter, the settlers tried to convert the “Infidels and Savages, living in those Parts” to Christianity. They were not very successful in this matter. Pocahontas, the first Indian maiden to marry an Englishman, became a Christian, and the colonists strove to convert others “from the worship of the devils to the service of God.” A 1610 report told those in England to “Doubt not God will raise our State and build his church in this excellent clime.”
Despite this religious background the Colony almost foundered several times due to famine and disease. In the first six months more than 60 of the original 105 died. Out of every shipload that arrived, less than half would survive their first 12 months in the new land. The winter of 1609-10 was known as “The Starving Time.” The population dwindled from about 500 souls to 60. The Colony was saved time and time again by the happy arrival of new ships with food and supplies. Captain John Smith saved many by his ability to obtain food from the Indians. He did this largely through trickery and their fear of gunpowder.
Some of the early Jamestown history reads a bit like that of our own day. Those who had been guaranteed an easy living with social security did not feel that they had to work. There was much stealing, and selling of public property to the Indians for private profit. Within six or seven weeks after the arrival of one ship, more than 200 much-needed hatchets, chisels, mattocks and pickaxes disappeared. Undoubtedly they had been black-marketed to the Indians.
All the real work of the Colony was done by one-fifth of the men. Four-fifths were pure parasites. Finally, in exasperation, Captain John Smith proclaimed, “But I protest by that God that made me, since necessity hath not power to force you to gather for yourselves those fruits the earth doth yield, you shall not only gather them for yourselves, but for those that are sick . . . and he that gathereth not every day as much as I do, the next day shall be set beyond the river, and be banished from the Fort as a drone, till he amend his condition or starve.” There were many charges of laziness, and much misery. Finally, Captain Smith decreed “You must obey this now for the law, that he who will not work shall not eat.”
Captain Smith was deposed in the fall of 1609. “The Starving Time” followed and all was despair. The following spring the few survivors boarded their ships and set sail for England. At the mouth of the James River they met 500 new colonists. They turned about and started over under a new Charter and a new Governor, Lord De La Warr. The men were ordered to work from six to ten in the morning, and from two to four in the afternoon. After his first year as Governor, Lord De La Wan-left the Colony in charge of an easy-going deputy.
The Colony fared very poorly until Sir Thomas Dale was placed in charge in 1611. He took drastic measures. Many thought him a tyrant. He was merciless to the law-breakers of that era, but friendly and helpful to the upright who would work. Anyone who demeaned a clergyman was soundly whipped in public. He made it a capital crime to stay away from church services, or to conduct unlicensed trading with the Indians.
Private Plots Allotted
The Secretary of the Colony, Ralph Hamor, best described Dale’s success in his 1614 report. He stated that when he arrived, four years earlier, there were less than 60 persons scarcely able “to go alone,” and now, in 1614, there were many times that number and “there is that plenty of food, which every man by his own industry may easily and doth procure that the poorest there and most in want, hath not been so much pinched with hunger this four years that if he would take any pains, he knew not where to fetch a good meal’s meat. .. they have more plenty than other, the reason hereof is at hand, for formerly, when our people were fed out of the common store and labored jointly in the manuring of the ground, and planting com, glad was the man that could slip from his labor, nay the most honest of them in a general business, would not take so much faithful and true pains in a week, as now he will do in a day, neither cared they for the increase, presuming that howsoever their harvest prospered, the general store must maintain them, by which means we reaped not so much com from the labors of 30 men, as three men have done for themselves: to prevent which mischief hereafter Sir Thomas Dale hath taken a new course, throughout the whole Colony, by which means, the general store (apparel only excepted) shall not be charged with anything: and this it is, he hath allotted to every man in the Colony, three English acres of clear Com ground, which every man is to mature and tend, being in the nature of Farmers, and they are not called unto any service or labor belonging to the Colony, more than one month in the year, which shall neither be in seed time, or in Harvest, for which, doing no other duty to the Colony, they are yearly to pay into the store two barrels and a half of com: there to be reserved to keep new men, which shall be sent over, the first year after their arrival.”
And so it was that putting an end to communism put an end to famine. Serious crimes and internal disorders abated. But the trials of the Colony were not over. Sir Thomas Dale was succeeded by Samuel Argali who ruled as a tyrant from 1617 to 1619. As Henry Cabot Lodge in his “History of the English Colonies in America” reports, “He (Argali) oppressed the colonists and robbed them of their property. . . . They had no protection against the tyrant. . . . Complaints soon found their way to England.”
Argali was finally replaced by Sir George Yeard-ley. This great Governor arrived in 1619 and established the first representative government here in America. The Colony soon had a written Constitution providing for a legislature of two houses. Members of the upper house were called Councillors, and those of the lower house, Burgesses. The new Assembly opened with a prayer for “the equality of all men before the law.” This meant that “persons of quality” were to be subject to the same punishments as others.
Yeardley confirmed the titles of all estates in those who held them before Argali’s disastrous reign. The rights of property were maintained against all arbitrary taxes. Every man was encouraged to “sell as dear as he could.” A free economy was established. The colonists were no longer forced to trade at the common store, but could buy and sell where they pleased. Within a year after this “veritable revolution” the population increased from 600 to more than 4,000. Although the Colony had many other trials its days of famine were over forever.
The Virginia colonists were then able “to live together, in the Fear and True Worship of Almighty God, Christian Peace, and civil Quietness, each with other, whereby every one may, with more Safety, Pleasure, and Profit, enjoy that, whereunto they shall attain with great Pain and Peril.”
Part II. Plymouth
Plymouth, the second English speaking colony in America, was founded on communism and the freedom of religion. The Pilgrims came to the stem New England coast in quest of an “asylum where conscience, property and person might be secure.” As a later colonist phrased it, they came in search of “soul freedom.” They thought communism could help them.
We in America owe much to these early Puritans. Their pilgrimage and principles have been a basic part of this country’s spiritual and material success. Their devotion to God and freedom surpasses the understanding of most modem men. They would brook no interference with their freedom to worship God according to their own fashion.
The Puritans were an early product of the Reformation. They had no faith in the forms and rituals of most churches. They rebelled not only against the rites of the Roman Catholic Church, which they called the “gross darkness of popery,” but also against the rules of worship laid down by Queen Elizabeth and King James. They believed “that not even a ceremony should be tolerated, unless it was enjoined by the word of God.” The Bible was their religious authority. They would yield to no earthly sovereign in their worship of God.
The Puritans were not appeasers, pussyfooters or Milquetoasts. As the great historian George Bancroft reports, “the Puritan martyrs never sought, by concessions to escape the flames. For them, compromise was itself apostasy.” When they were ordered to attend Church of England services or face exile or death, they remained loyal to their own simple services.
They believed that God had given them the right to choose their pastors and worship the Lord as they saw fit. Accordingly, they resolved to leave their mother land and seek asylum in freedom-loving Holland. Their religious persecutors did everything possible to keep them in England. In 1608, after many trials and much loss of property, they finally managed their escape to Holland.
In his “History of Plymouth Plantation,” Governor William Bradford describes the life of the Puritans in Holland in these words, “such was the true piety, the humble zeal, & fervent love of this people towards God and His ways, and the single heartedness & sincere affection one towards another, that they came as near the primitive pattern of the first churches, as any other church of these later times have done.”
After a decade in this foreign land, they became restless. They wanted a place of their own. The twelve-year truce between Spain and Holland was drawing to a close. They feared a new European war. So, after much prayer and consultation, they decided to move on to the New World where they could shake the “yoke of antichristian bondage, and as the Lord’s free people, join themselves into a church estate, in the fellowship of the gospel, to walk in all His ways, made known, or to be made known unto them, according to their best endeavors, whatsoever it should cost them, the Lord assisting them.”
Once they made the decision, “those that were to go, prepared themselves with all speed, and sold of their estates and put in their moneys into the common stock, which was disposed by those appointed, for the making of general provisions.” Agreements were made with English adventurers who helped finance the enterprise in the hope of future profits. The good Puritans, however, were not thinking of material things. They were thinking of a refuge where no one could tell them how to worship God.
Based on Communism
The original agreement provided “that all such persons as are of this colony, are to have their meat, drink, apparel, and all provisions out of the common stock & goods of the said colony.” Today we might call that “social security.” It was further provided that during the first seven years, “all profits & benefits that are got by trade, traffic, trucking, working, fishing, or any other means of any person or persons, remained still in the common stock.” Many of the colonists had hoped that they would be allowed to own their own homes and improved lands. They even hoped that they might be allowed to work two days a week for their own “private employment” but this was denied them.
After several false starts, they were forced to leave their second ship behind. The jam-packed Mayflower finally reached the shores of Cape Cod on November 11, 1620. It took another month to find a suitable place to land and build new homes in the deep snows of that New England winter. Before they landed, they drew up the famous Mayflower Compact in which they agreed “in the presence of God, and of one another,” to obey “such just & equal Laws, Ordinances, Acts, Constitutions, & Offices, from time to time, as shall be thought meet & convenient for the general Good of the colony; unto which we promise all due Submission and Obedience.”
Early Famines
The hard New England winter of 1620-21 took a severe toll. As Bradford reported it, “of 100 & odd persons, scarce 50 remained.” This first, tough winter was followed by two years of famine and starvation. The clumsy colonists working together for their “common wealth” were scarcely able to find or produce enough to keep themselves alive. Their woes increased with the arrival of new colonists. Hungry mouths multiplied while their “common wealth” melted.
When the crops of 1622 were harvested, “all had their hungry bellies filled,” but they added little to the common store which had to last another twelve months. Governor Bradford attributed their poor harvest chiefly to “their weakness for want of food, to tend it as they should have done. Also much was stolen both by night and day, before it became scarce eatable, & much more afterward. And though many were well whipped (when they were taken) for a few ears of com, yet hunger made others (whom conscience did not restrain) to venture. So as it well appeared the famine must still ensue the next year also.”
These good Christian men, with little thought of material comforts, were unable to make collectivism work. Communism failed to provide them with the strength they needed to live and worship God as was their simple wont.
Private Enterprise Proclaimed
“So they began to think how they might raise as much com as they could, and obtain a better crop than they had done, that they might not still thus languish in misery. At length, after much debate of things, the Governor (with the advice of the chief amongst them) gave way that they should set com every man for his own particular, and in that regard trust to themselves in all other things to go on in the general way as before. And so assigned to every family a parcel of land, according to the proportion of their number for that end, only for present use (but made no division for inheritance), and ranged all boys & youth under some family. This had very good success; for it made all hands very industrious, so as much more com was planted than otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set com, which before would allege weakness, and inability; whom to have compelled would have been thought great tyranny and oppression.
“The experience that was had in this common course and condition, tried sundry years, and that amongst godly and sober men, may well evince the vanity of that conceit of Plato and other ancients, applauded by some of later times;—that the taking away of property, and bringing in community into a common wealth, would make them happy and flourishing: as if they were wiser than God.
“For this community was found to breed much confusion and discontent, and retard much employment that would have been to their benefit and comfort. For the young men that were most able and fit for labor & service did repine that they should spend their time & strength to work for other men’s wives and children, without any recompense. The strong, or man of parts, had no more in division of victuals & clothes, than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labors and victuals, clothes, etc., with the meaner & younger sort, thought it some indignity & disrespect unto them. And for mens wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc., they deemed it a kind of slavery, neither could many husbands well brook it.
Crops a Plenty
“Upon the point all being to have alike, and all to do alike, they thought themselves in the like condition, and one as good as another; and so, if it did not cut of those relations that God hath set amongst men, yet it did at least much diminish and take of the mutual respects that should be preserved amongst them. And would have been worse if they had been men of another condition. Let none object this is men’s corruption, and nothing to the course itself. I answer, seeing all men have this corruption in them, God in his wisdom saw another course fitter for them.”
The following summer they had a great drouth. So, they set aside a day for prayer and communion with God. Their prayers were answered. The gentle patter of rain came and continued at frequent intervals for a fortnight. Years later Governor Bradford wrote in his 1623 report, “By this time harvest was come, and instead of famine, now God gave them plenty, and the face of things was changed, to the rejoicing of the hearts of many, for which they blessed God. And the effect of their particular planting was well seen, for all had, one way & other, pretty well to bring the year about, and some of the abler sort and more industrious had to spare, and sell to others, so as any general want or famine hath not been amongst them since to this day.”
By the end of another year the colony was able to export “a boats load of com.” Though the colony’s problems were many, the primitive problem of starvation had been licked. The Plymouth experience was similar to that at Jamestown. When free enterprise replaced communism, abundance replaced scarcity. It was only with the help of free enterprise that freedom of religion was maintained. The two go hand in hand.
As Bradford reported, “out of small beginnings, great things have been produced; and as one small candle may light a thousand, so the light here kindled hath shown to many, yea, in some sort to our whole nation.”
Ludwig von Mises
An examination of the so-called horrors of the “Industrial Revolution” and the persistent myth that industrial progress is a plot against employees.
The economists flatly deny that labor unions and government prolabor legislation can and did lastingly benefit the whole class of wage earners and raise their standard of living. But the facts, say the anti-economists, have refuted these fallacies. As they see it, the statesmen and legislators who enacted the factory acts displayed a better insight into reality than the economists; while laissez-faire philosophy allegedly taught that the sufferings of the toiling masses are unavoidable, the common sense of laymen succeeded in quelling the worst excesses of profit-seeking business. The improvement in the conditions of the workers, they say, is entirely an achievement of governments and labor unions.
The factory system developed in a continuous struggle against innumerable obstacles. It had to fight popular prejudice, old established customs, legally binding rules and regulations, the animosity of the authorities, the vested interests of privileged groups, the envy of the guilds. The capital equipment of the individual firms was insufficient, the provision of credit extremely difficult and costly. Technological and commercial experience was lacking. Most factory owners failed; comparatively few succeeded. Profits were sometimes considerable, but so were losses. It took many decades until the common practice of reinvesting the greater part of profits earned accumulated adequate capital for the conduct of affairs on a broader scale.
That the factories could thrive in spite of all these hindrances was due to two reasons. First there were the teachings of the new social philosophy expounded by economists, who demolished the prestige of mercantilism, paternalism, and restrictionism. They exploded the superstitious belief that labor-saving devices and processes cause unemployment and reduce all people to poverty and decay. The laissez-faire economists were the pioneers of the unprecedented technological achievements of the last two hundred years.
Then there was another factor that weakened the opposition to innovations. The factories freed the authorities and the ruling landed aristocracy from an embarrassing problem that had grown too large for them. They provided sustenance for the masses of paupers. They emptied the poor houses, the workhouses, and the prisons. They converted starving beggars into self-supporting breadwinners.
The factory owners did not have the power to compel anybody to take a factory job. They could only hire people who were ready to work for the wages offered to them. Low as these wage rates were, they were nonetheless much more than these paupers could earn in any other field open to them. It is a distortion of facts to say that the factories carried off the housewives from the nurseries and the kitchens and the children from their play. These women had nothing to cook with and to feed their children. These children were destitute and starving. Their only refuge was the factory. It saved them, in the strict sense of the term, from death by starvation.
It is deplorable that such conditions existed. But if one wants to blame those responsible, one must not blame the factory owners who—driven by selfishness, of course, and not by “altruism”—did all they could to eradicate the evils. What had caused these evils was the economic order of the pre-capitalistic era, the order of the “good old days.”
In the first decades of the Industrial Revolution the standard of living of the factory workers was shockingly bad when compared with contemporary conditions of the upper classes and with the present conditions of the industrial masses. Hours of work were long, the sanitary conditions in the workshops deplorable. The individuals capacity to work was used up rapidly. But the fact remains that for the surplus population which the enclosure movement had reduced to dire wretchedness and for which there was literally no room left in the frame of the prevailing system of production, work in the factories was salvation. These people thronged into the plants for no reason other than the urge to improve their standard of living.
The laissez-faire ideology and its offshoot, the
“Industrial Revolution,” blasted the ideological and institutional barriers to progress and welfare. They demolished the social order in which a constantly increasing number of people were doomed to abject need and destitution. The processing trades of earlier ages had almost exclusively catered to the wants of the well-to-do. Their expansion was limited by the amount of luxuries the wealthier strata of the population could afford. Those not engaged in the production of primary commodities could earn a living only as far as the upper classes were disposed to utilize their skill and services. But now a different principle came into operation. The factory system inaugurated a new mode of marketing as well as of production. Its characteristic feature was that the manufactures were not designed for the consumption of a few well-to-do only, but for the consumption of those who had hitherto played but a negligible role as consumers. Cheap things for the many, was the objective of the factory system. The classical factory of the early days of the Industrial Revolution was the cotton mill. Now, the cotton goods it turned out were not something the rich were asking for. These wealthy people clung to silk, linen, and cambric.
Whenever the factory with its methods of mass production by means of power-driven machines invaded a new branch of production, it started with the production of cheap goods for the broad masses. The factories turned to the production of more refined and therefore more expensive goods only at a later stage, when the unprecedented improvement in the masses’ standard of living which they caused made it profitable to apply the methods of mass production also to these better articles. Thus, for instance, the factory-made shoe was for many years bought only by the “proletarians” while the wealthier consumers continued to patronize the custom shoemakers. The much talked about sweatshops did not produce clothes for the rich, but for people in modest circumstances. The fashionable ladies and gentlemen preferred and still do prefer custom-made frocks and suits.
The outstanding fact about the Industrial Revolution is that it opened an age of mass production for the needs of the masses. The wage earners are no longer people toiling merely for other people’s well-being. They themselves are the main consumers of the products the factories turn out. Big business depends upon mass consumption. There is, in present-day America, not a single branch of big business that would not cater to the needs of the masses. The very principle of capitalist entrepreneurship is to provide for the common man. In his capacity as consumer the common man is the sovereign whose buying or abstention from buying decides the fate of entrepreneurial activities. There is in the market economy no other means of acquiring and preserving wealth than by supplying the masses in the best and cheapest way with all the goods they ask for.
Blinded by their prejudices, many historians and writers have entirely failed to recognize this fundamental fact. As they see it, wage earners toil for the benefit of other people. They never raise the question who these “other” people are.
The early industrialists were for the most part men who had their origin in the same social strata from which their workers came. They lived very modestly, spent only a fraction of their earnings for their households, and put the rest back into the business. But as the entrepreneurs grew richer, the sons of successful businessmen began to intrude into the circles of the ruling class. The highborn gentlemen envied the wealth of the parvenus and resented their sympathies with the reform movement. They hit back by investigating the material and moral conditions of the factory hands and enacting factory legislation.
The history of capitalism in Great Britain as well as in all other capitalist countries is a record of an unceasing tendency toward the improvement in the wage earners’ standard of living. This evolution coincided with the development of prolabor legislation and the spread of labor unionism on the one hand and with the increase in the marginal productivity of labor on the other hand. The economists assert that the improvement in the workers’ material conditions is due to the increase in the per capita quota of capital invested and the technological achievements which the employment of this additional capital brought about. As far as labor legislation and union pressure did not exceed the limits of what the workers would have got without them as a necessary consequence of the acceleration of capital accumulation as compared with population, they were superfluous. As far as they exceeded these limits, they were harmful to the interests of the masses. They delayed the accumulation of capital, thus slowing down the tendency toward a rise in the marginal productivity of labor and in wage rates. They conferred privileges on some groups of wage earners at the expense of other groups. They created mass unemployment and decreased the amount of products available for the workers in their capacity as consumers.
The apologists of government interference with business and of labor unionism ascribe all the improvements in the conditions of the workers to the actions of governments and unions. Except for them, they contend, the workers’ standard of living would be no higher today than it was in the early years of the factory system.
It is obvious that this controversy cannot be settled by appeal to historical experience. With regard to the establishment of the facts there is no disagreement between the two groups. Their antagonism concerns the interpretation of events, and this interpretation must be guided by the theory chosen. The epistemological and logical considerations which determine the correctness or incorrectness of a theory are logically and temporarily antecedent to the elucidation of the historical problem involved. The historical facts as such neither prove nor disprove any theory. They need to be interpreted in the light of theoretical insight.
Most of the authors who wrote the history of the conditions of labor under capitalism were ignorant of economics and boasted of this ignorance. However, this contempt for sound economic reasoning did not mean that they approached the topic of their studies without prepossession and without bias in favor of any theory. They were guided by the popular fallacies concerning governmental omnipotence and the alleged blessings of labor unionism. It is beyond question that the Webbs as well as Lujo Brentano and a host of minor authors were at the very start of their studies imbued with a fanatical dislike of the market economy and an enthusiastic endorsement of the doctrines of socialism and interventionism. They were certainly honest and sincere in their convictions and tried to do their best. Their candor and probity exonerates them as individuals; it does not exonerate them as historians. However pure the intentions of a historian may be, there is no excuse for his recourse to fallacious doctrines. The first duty of a historian is to examine with the utmost care all the doctrines to which he resorts in dealing with the subject matter of his work. If he neglects to do this and naively espouses the garbled and confused ideas of popular opinion, he is not a historian but an apologist and propagandist.
The antagonism between the two opposite points of view is not merely a historical problem. It refers no less to the most burning problems of the present day. It is the matter of controversy in what is called in present-day America the problem of industrial relations.
Let us stress one aspect of the matter only. Vast areas—Eastern Asia, the East Indies, Southern and Southeastern Europe, Latin America—are only superficially affected by modem capitalism. Conditions in these countries by and large do not differ from those of England on the eve of the “Industrial Revolution.” There are millions and millions of people for whom there is no secure place left in the traditional economic setting. The fate of these wretched masses can be improved only by industrialization. What they need most is entrepreneurs and capitalists. As their own foolish policies have deprived these nations of the further enjoyment of the assistance imported foreign capital hitherto gave them, they must embark upon domestic capital accumulation. They must go through all the stages through which the evolution of Western industrialism had to pass. They must start with comparatively low wage rates and long hours of work. But, deluded by the doctrines prevailing in present-day Western Europe and North America, their statesmen think that they can proceed in a different way. They encourage labor-union pressure and alleged prolabor legislation. Their interventionist radicalism nips in the bud all attempts to create domestic industries. These men do not comprehend that industrialization cannot begin with the adoption of the precepts of the International Labor Office and the principles of the American Congress of Industrial Organizations. Their stubborn dogmatism spells the doom of the Indian and
Chinese coolies, the Mexican peons, and millions of other peoples, desperately struggling on the verge of starvation.
Hans F. Sennholz
Not long ago, a small Pennsylvania corporation received the Presidential “E” award for its contribution to export trade and the nation’s balance of payments. In its fiscal year, 1965, the company sold more than $16 million of its products to foreign customers. Since 1960, its sales abroad returned $55 million to the United States.
It seems that some American policies are reverting to the principles and doctrines of the seventeenth century. Others are repeating the errors and follies of the dark Middle Ages. In 1628 the best known mercantilist writer, Thomas Mun, urged his countrymen always “to sell more to strangers yearly than we consume of theirs in value.” In 1667 the most famous of German mercantilist writers, Becher, advocated as a most important economic rule and axiom “that it is always better to sell goods to others than to buy goods from others, for the former brings a certain advantage and the latter inevitable damage.” In 1712, Charles King in The British Merchant declared the export of finished products “in the highest degree beneficial,” the export of natural products “so much clear gain,” and the corresponding import “so much real loss.”
Napoleon Bonaparte applied this idea on a huge scale in his Continental System. He gave public recognition, bestowed medals, and issued citations to Frenchmen who exported manufactured goods to England.
In recent years our foreign trade policies gradually have fallen under the sway of seventeenth century economic thought. Our “unfavorable” balance of payments caused the Eisenhower Administration to prohibit American ownership of gold in foreign countries. Since then, the United States government added a “voluntary” program that restricts bank and business investments abroad in order to keep money and gold in the United States. Furthermore, a punitive tax on American purchases of foreign securities aims to curb our heavy losses of gold. Those are some of the steps already taken toward comprehensive government control over all our foreign trade and transactions.
In France exportation of gold and silver was outlawed from the Middle Ages until the eighteenth century. The usual penalty for taking coins out of the realm was death. In Spain and Portugal the export of bullion and coins went on undisturbed for more than 200 years as if no prohibitions existed, even though the penalty was death.
The “Spending” Multiplier
In recent months we have witnessed a marked increase in government and private spending and a strong rise in economic activity. The demand for goods and services has been stimulated by expansionary government and Federal Reserve actions. Spending, whether by governments or citizens is considered the powerful engine of economic progress and prosperity.
Spendthrifts of all ages have advanced similar economic doctrines. In 1686, for instance, the Austrian writer, Wilhelm Schroetter, Thomas Mun’s pupil, wrote: “The more a manufacturer causes money to pass from one hand to another, the more useful it is to the country, for so many people does it maintain.” And at another place: “Through the exchange of money the sustenance of so many people is multiplied.”
Export Embargoes
On Jan. 21, 1966, the United States and British governments placed curbs on exportation of copper in order to protect their shares of dwindling world supplies of the metal. The United States Commerce Department sharply expanded its controls over exports of copper from the United States and clamped tight limits on a broad range of categories, including shipments overseas of copper ores and refined copper.
In England, this policy of “provision” dated back to the twelfth century and lasted until the nineteenth. Export prohibitions on iron, copper and bell metal were repealed in 1694. Other restrictions that were imposed by Henry II, in 1176 and 1177, lasted until 1822. The high-water mark was reached under Edward III about the middle of the fourteenth century.
Early “Poor Laws”
Even our war on poverty declared by the present administration is not new at all. During the period of the Stuarts and of the Tudors, the English government endeavored to aid the low income classes of society. The avowed aim of an act of Parliament in 1603 was to raise the wages of textile workers. Minimum wage rates were fixed, and manufacturers were fined one shilling for every penny of wages paid below the prescribed rates. Especially in the years 1629 to 1640, a wide “policy of welfare” was pursued.
In order to prevent unemployment, businessmen were compelled to continue their operations even when suffering losses. They had to keep wages high, and were imprisoned in case of disobedience. For the benefit of the poor, food prices were intensively controlled. Grain was to be sold under cost price.
Already in 1563, the Elizabethan Statute of Artificers tried to regulate labor conditions in all details, and it remained on the books until 1814. In order to assure “just” wages to the working population, wage rates were fixed anew each year by the Justices of the Peace according “to the plenty or scarcity of the time.” The Justices in turn had to consider the cost of living by referring to “the prices of all kind of victuals, fuel, raiment and apparel, both linen and woolen, and also house rent.” Wage fixing in sixteenth-century London was similar in many respects to wage fixing in London today.
Regulation of Business
If you believe that government regulations of commerce and industry are new and progressive, you should study the twelfth century English industrial regulations. At least since 1197, the English state had tried to regulate the technique of manufacture. For the cloth industry, for instance, the English government prescribed the various dimensions of cloth, technique of production, dyeing, stretching, finishing, the tools of trade, the packaging and labeling, and so on. Similar regulations, more or less complete, were imposed on all other industries.
In France, Louis XIV, the Sun King, appointed intendants and inspectors who were charged with the regulation of industry. From the handling of raw materials to all subsequent stages of production, these servants of the king controlled the production process.
The system of control obviously necessitated a variety of penalties. Frequently, “defective” goods were confiscated or cut to pieces, money fines were imposed, or the right to practice the craft or conduct the business was withdrawn. According to a decree of 1670, the name of the offending merchant was to be posted, and the offender himself could be placed in a pillory for public derision.
In spite of countless regulations and limitations that aimed to achieve uniform standards, corruption and personal favoritism blunted the controls. The government could make individual exceptions to any prescription. Personal influence was as important as it is today.
Mercantilism Persists
For instance, the medical profession today labors under the professional discipline of several regulatory agencies. Under the ancien regime, training and examination of physicians also was a serious government matter. Under the watchful eyes of the government, ancient quackery was to be perpetuated. In some cases, persons with no training whatsoever were practicing the business of healing and offering salves and medicaments because they curried favor with the inspectors, or succeeded in winning over the lackeys, valets, mistresses, and adventuresses of the Court. Royal charters, permits from princes, and acquired titles of physicians of the king or queen, of surgeons of the navy, and the like, sanctioned all kinds of quackery.
The methods of favoritism, currying favors, obtaining franchises, licenses, or government orders have not changed materially since the seventeenth century. Diamonds and minks, personal connections and right contacts, government positions and offices, seem to retain their significance for professional success and financial reward.
How modem and progressive are our prevailing doctrines and official policies? A historian who attempts to dissect the so-called modem version of political economy may be surprised to discover its true age. Despite claims of originality, many of the modem are of ancient origin. Some stem from the armory of Marxism and Fabian socialism as they were developed during the nineteenth century. Others date back to the age of Mercantilism that prevailed in Western Europe from the sixteenth to the eighteenth century. And still others have survived from the darkness of the Middle Ages. Much that passes for progress today is but a regression into the follies of the past.
Footnotes
1 An address before the Agricultural History Society, Washington, D. C., March 16, 1922
2 Numbers in parentheses refer to “List of References” at conclusion of article.
3 No attempt has been made in this paper to cover the history of price fixing since 1800 government monopolies such as the Brazilian valorization of coffee, the tobacco monopoly in France, and that of sugar in Germany, as well as others which might be mentioned, have been fully reported by others. The history of price fixing in the U.S. during the War of 1914-18 has also been written in the Bulletins of the War Industries Board, on the history of prices during the war. Litman gives a good account for Great Britain and the U.S. in his “Prices and Price Control in Great Britain and the U.S. During the War.”
4 Some scholars place the date at 2082 B.C. and still others at 1500 B.C. It was probably in the reign of Aphobis, at the end of the 17th dynasty, according to Dr. Henry Brugsch, in his history of Egypt under the Pharaohs. Trans, by Philip Smith. (London, John Murray, v. 1, p. 300-306.)
5 Original sources:
Lepsius, Richard. Denkmaler aus Aegypten und Aethiopien. Berlin. 1849-59 v. 3, p. 76, 77.
Papyrus Abbott, published in the “Select Papyri in the Hieratic Character” from the Collections of the British Museum, London, 1844-60.
6 It is evident from the context that “grain” as used in these translations means rice.
7 A medimnus was equal to 2/3 of a bushel or 8 gallons.
8 The population of the whole of Attica at this time was about 500,000, of which Athens comprised about 180,000.
9 The English com laws from 1804 to 1846 furnish probably the best known instance of governmental attempts to stabilize prices in more modem times. The com statutes of these years are simply a record of the impotence of legislation to maintain the price of a commodity at a high point when all the natural economic causes in operation are opposed to it. Encyclopedia Brit. 11th ed., v. 7, p. 177.
10 From The Freeman, August 1964
11 From Christian Economics January 29 and March 25, 1952
12 Extracted from Human Action (Yale, 1949, 1963; Regnery, 1966), Chapter XXI, latter part of Section 7. Reprinted from The Freeman, February 1956
13 The attribution of the phrase “the Industrial Revolution” to the reigns of the two last Hanoverian Georges was the outcome of deliberate attempts to melodramatize economic history in order to fit it into the Procrustean Marxian schemes. The transition from medieval methods of production to those of the free enterprise system was a long process that started centuries before 1760 and, even in England, was not finished in 1830. Yet, it is true that England’s industrial development was considerably accelerated in the second half of the eighteenth century. It is therefore permissible to use the term “Industrial Revolution” in the examination of the emotional connotations with which Fabianism, Marxism, the Historical School, and Institutionalism have loaded it.
14 J. L. Hammond and Barbara Hammond, The Skilled Labourer 1760-1832 (2d ed. London, 1920). p. 4.
15 In the Seven Years’ War 1,512 British seamen were killed in battle while 133,708 died of disease or were missing. Cf. W. L. Dorn, Competition for Empire 1740-1763 (New York, 1940). p. 114.
16 J. L. Hammond and Barbara Hammond, loc. cit.
17 F. C. Dietz, An Economic History of England (New York, 1942). pp. 279 and 392.
18 From The Freeman, April 1966
19 Cf. Eli F. Heckscher, Mercantilism, Vol. II, p. 246.
20 An Essay on the State of England, in relation to its Trade, London, 1695, p. 148 ff; cited in Heckscher. Vol II, p. 209.
21 Ibid, p. 92.
- 1FOOD CONTROL DURING FORTY-SIX CENTURIES: A CONTRIBUTION TO THE HISTORY OF PRICE FIXING75.*
- 2In the book of Genesis (12)75.† there are various references dating back to the time of Abraham to the fact that Egypt was a granary where all the people were sure of finding a plenteous store of corn.
- 3In connection with this control it would seem that every possible expedient and experiment had been tried. One of the most frequent methods of control used has been the limitation of prices by legal enactment. The results have been astonishingly uniform considering the variety of conditions and circumstances under which the experiments have taken place. They make an interesting record and one which contains food for thought, for the problem of the people’s welfare has been much the same in all ages and it is not yet solved.75.1
- 4The well-known story of Joseph shows how the control of the food supply by the government reduced a people to slavery. Joseph gathered and stored for Pharaoh in years of abundance one-fifth of all the harvests. The improvident Egyptians lived well and laid by no stores. When famine came they and the people in the nearby countries went to Joseph and bought food from him until all their money was gone; then they gave him their cattle for food. After they had bartered away all their cattle they offered their land and themselves in exchange for subsistence. Having thus reduced them to slavery as the price of life, Joseph about 1700 B.C.75.2 gave them seed and put them on the land again. Flavius Josephus tells the story as follows:
- 5The great Egyptologist Erman (9) corroborates the testimony of Josephus by giving an account of the government control over grain, and descriptions of the granaries75.3 which were surprisingly like our elevators—the grain being poured in at the top and taken out at the bottom by means of a sliding door. The outstanding result of the Egyptian control of the grain crop was a system of land tenure by which the land became the property of the monarch, and was rented from him by the agricultural class.
- 6We are told that, “According to the official system of Chou (about 1122 B.C.), the superintendent of grain75.4 looked around the fields and determined the amount of grain to be collected or issued, in accordance with the condition of the crop; fulfilling the deficit of their demand and adjusting their supply.” (6)
- 7Syria, Egypt, Lybia, and Sicily. A great quantity was imported, but not all for domestic use—some of it was to be sold in the Piraeus to foreigners. It has been estimated by Boeckh (2) that Attica needed annually 3,400,000 medimni75.5 of grain, about half of which it could produce in a good season. This left, as the lowest of needed importations, 1,700,000 medimni or 1,133,333 1/3 bushels. In an unpropitious season, when the domestic crop was scanty, this amount of importation was far from sufficient, so that one of the first objects of an Athenian statesman was to provide for an adequate supply of imported grain, and the regulations in regard to the grain trade were very important. Boeckh in his “Public Economy of the Athenians” says:
- 8We learn also that the “market masters,” who as we have said before had the superintendence of the sale of all other commodities, were not considered sufficient to handle the grain trade also but that “grain inspectors” were appointed for this duty alone and it required fifteen of them to take care of the trade in the city and port of Athens.75.6 Being a grain inspector at that time was no sinecure, for Lysias says:
- 9Great Britain, 1199-181575.7
- 10HOW TO END POVERTY76.*
- 11AMERICAN COMMUNISM77.*
- 12FACTS ABOUT THE “INDUSTRIAL REVOLUTION”78.*
- 13Socialist and interventionist authors assert that the history of modem industrialism and especially the history of the British “Industrial Revolution” provide an empirical verification of the “realistic” or “institutional” doctrine and utterly explode the “abstract” dogmatism of the economists.78.1
- 14Such are the ideas permeating most of the historical studies dealing with the evolution of modem industrialism. The authors begin by sketching an idyllic image of conditions as they prevailed on the eve of the “Industrial Revolution.” At that time, they tell us, things were, by and large, satisfactory. The peasants were happy. So also were the industrial workers under the domestic system. They worked in their own cottages and enjoyed a certain economic independence since they owned a garden plot and their tools. But then “the Industrial Revolution fell like a war or a plague” on these people.78.2 The factory system reduced the free worker to virtual slavery; it lowered his standard of living to the level of bare subsistence; in cramming women and children into the mills it destroyed family life and sapped the very foundations of society, morality, and public health. A small minority of ruthless exploiters had cleverly succeeded in imposing their yoke upon the immense majority.
- 15The truth is that economic conditions were highly unsatisfactory on the eve of the Industrial Revolution. The traditional social system was not elastic enough to provide for the needs of a rapidly increasing population. Neither farming nor the guilds had any use for the additional hands. Business was imbued with the inherited spirit of privilege and exclusive monopoly; its institutional foundations were licenses and the grant of a patent of monopoly; its philosophy was restriction and the prohibition of competition both domestic and foreign. The number of people for whom there was no room left in the rigid system of paternalism and government tutelage of business grew rapidly. They were virtually outcasts. The apathetic majority of these wretched people lived from the crumbs that fell from the tables of the established castes. In the harvest season they earned a trifle by occasional help on farms, for the rest they depended upon private charity and communal poor relief. Thousands of the most vigorous youths of these strata were pressed into the service of the Royal Army and Navy; many of them were killed or maimed in action; many more perished inglorious-ly from the hardships of the barbarous discipline, from tropical diseases, or from syphillis.78.3 Other thousands, the boldest and most ruthless of their class, infested the country as vagabonds, beggars, tramps, robbers, and prostitutes. The authorities did not know of any means to cope with these individuals other than the poorhouse and the workhouse. The support the government gave to the popular resentment against the introduction of new inventions and labor-saving devices made things quite hopeless.
- 16Mr. and Mrs. Hammond tell us that the workers were happier in 1760 than they were in 1830.78.4 This is an arbitrary value judgment. There is no means of comparing and measuring the happiness of different people and of the same people at different times. We may agree for the sake of argument that an individual who was born in 1740 was happier in 1760 than in 1830. But let us not forget that in 1770 (according to the estimate of Arthur Young) England had 8.5 million inhabitants, while in 1831 (according to the census) the figure was 16 million.78.5 This conspicuous increase was mainly conditioned by the Industrial Revolution. With regard to these additional Englishmen the assertion of the eminent historians can only be approved by those who endorse the melancholy verses of Sophocles: “Not to be born is, beyond all question, the best; but when a man has once seen the light of day, this is next best, that speedily he should return to that place whence he came.”
- 17Mr. and Mrs. Hammond tell us that the workers were happier in 1760 than they were in 1830.78.4 This is an arbitrary value judgment. There is no means of comparing and measuring the happiness of different people and of the same people at different times. We may agree for the sake of argument that an individual who was born in 1740 was happier in 1760 than in 1830. But let us not forget that in 1770 (according to the estimate of Arthur Young) England had 8.5 million inhabitants, while in 1831 (according to the census) the figure was 16 million.78.5 This conspicuous increase was mainly conditioned by the Industrial Revolution. With regard to these additional Englishmen the assertion of the eminent historians can only be approved by those who endorse the melancholy verses of Sophocles: “Not to be born is, beyond all question, the best; but when a man has once seen the light of day, this is next best, that speedily he should return to that place whence he came.”
- 18PROGRESS OR REGRESS?79.*
- 19In England, comprehensive foreign exchange control dates back to the darkness of the Middle Ages. Until the reign of Charles I (1628) the office of Royal Exchanger handled all exchange operations and all trade in precious metals.79.1 Exportation of bullion and coin was summarily outlawed until 1663 when the prohibition was narrowed to English coins only.
- 20Thrift was regarded as the cause of unemployment, for real income was thought to diminish if money were withdrawn from circulation. For this reason Schroetter wrote a long discussion on “How a Prince Should Limit his Thrift.” In 1695 the English writer, Cary, advocated the same principle with even greater clarity. He stated that everybody’s spending causes income to rise. If everybody increases his spending, according to Cary, everybody “might then live more plentifully.”79.2
- 21In France, export restrictions were first imposed during the thirteenth and fourteenth centuries. They aimed at keeping essential materials, particularly foodstuffs, within the country. At the beginning of the nineteenth century, Napoleon still conducted a “policy of provision” with regard to foodstuffs. The first French law that permitted their exportation was enacted in 1819.79.3
