Michael Furgiuele

HIST 616

Second Examination

Dr. R. Luehrs, Instructor

February 14, 2005

 

Discuss the similarities between liberalism and classical economic theory, two systems often allied in the nineteenth century.  What are their differences?  Why did the early critics of industrial capitalism usually reject both liberalism and classic economic theory?

 

Nineteenth-century liberalism was chiefly associated with the “the liberal conception of individual liberty and human rights” (Kramer, 2001, p.36).  Classic liberalism used the outcome of the French Revolution to identify the need to protect the rights of individuals and work toward common goals, which would benefit the majority, rather than the divine right of Kings and other nobility.  Many of the core elements of freedom associated with democratic functions are attributed to these liberal ideas including freedom of speech, press and equality under the law (lecture 8).  In addition, strict liberals believed that a division existed between church and state and that religion was not the ultimate power available to ensure personal liberties.  As such, liberals followed the Enlightenment ideas of reason, progress, and nature – allowing individuals to direct their own paths and form representative governments to ensure that laws served the majority.  Many theories and terms identified with liberalism included England’s concept of utilitarianism, which reinforced the need for laws to provide a check against the ruling class.

 

One of the leading authors of English utilitarianism was Jeremy Bentham who believed “the greatest good would come by minimizing pain and maximizing pleasure” in a rational society (Kramer, 2001, p.38).  Bentham believed in majority rule and imposition of laws to protect the majority (lecture 8).  He created the ‘felicific calculus’ to prove his theory and measure pain vs. pleasure.  In many ways, Bentham created a social equivalent of a free-market economy, which weighed supply and demand as factors for determining happiness and contentment.

 

While liberal philosophies were debated in England and France, England was also initializing the Industrial Revolution, which shifted the need for manual labor in favor of technology.  The Revolution began with agriculture and gradually spread to other industries, once dominated by human capital.  However, the social ramification of the Industrial Revolution was the increase in cities, and overwhelming supply of manual laborers who were exposed to long workdays and deplorable conditions.  As conditions grew worse, economists like Adam Smith used the liberal concept of laissez-faire systems to justify the changing social structure (lecture 11).

 

Adam Smith wrote The Wealth of Nations as an analysis of how the new socio-economic structure affected England.  Like French and English liberals, he believed in limiting government intervention on economics and industry, an essential element of laissez-faire economics.  He believed that “natural laws of economic life could function in a free market; this market (like nature) was controlled by a kind of natural law of supply and demand” (Kramer, 2001, p. 54).  In this respect, his views were similar to those of Bentham.  He further believed that each nation was capable of producing primary products, which could be supplied to other nations in exchange for other products.  In this way, Smith reinforces the German Idealist theory of Volksgeist, a distinctive spirit or trait that one nation had over another (lecture 6).  However, by the early nineteenth-century, Smith’s theory of economic equality was not accurate.  The Industrial Revolution made it “clear that most workers were not getting more wealth; they were living in almost subsistence conditions in crowded cities” (Kramer, 2001, p.54).

 

David Ricardo in an explanation of why workers were not accumulating wealth as Smith had envisioned also applied Bentham’s theory of ‘felicific calculus’.  Ricardo wrote The Principles of Political Economy which theorized, “Classic economics assumed that the economic “laws” of the capitalist economic system necessarily make most people poor” (Kramer, 2001, p.55), believing that workers were part of a system which reflected a natural law, the “Iron Law of Wages” (lecture 11). His idea identified the need to maintain wages at a low rate for workers to reduce their ability to move beyond their social setting, increasing their families and decreasing the finite availability of the food supply.

 

While there were similarities between classical economic theory and liberalism, many identified the ideas of men like Smith and Ricardo as rationalization for capitalists to maintain their wealth and reduced the protection of personal liberty.  In response, alternative theories and criticisms were developed against the capitalist society and laissez-faire economics. 

           

Two central criticisms of industrialization produced the theories, which Romantics embraced, and would later be termed environmentalism and socialism.  These critics believed that “both the environmentalists (to use a more recent term) and the socialists believed that important aspects of an older world were disappearing – natural beauty and social community” (Kramer, 2001, p.56).  Environmentalists saw industrialization as a blight, which robbed the world of natural beauty to obtain its natural resources.  The socialist believed the socio-economic systems associated with capitalism removed personal freedoms.  The expansion of wealth was being concentrated in the select few and workers were being treated unfairly, rejecting the “natural order” theories of Ricardo.  Socialists believed that a sense of cooperation was necessary to ensure accurate and proportionate disbursement of wealth and materials (lecture 12).  Dr. Kramer discussed the ideas and actions taken by three socialist – Robert Owen, Henri Saint-Simon, and Charles Fourier.

 

Robert Owen used the wealth he accumulated during industrialization to develop a utopian-style society for his workers.  He “purchased a cotton factory in Scotland, where he created a new kind of ideal factory town with shorter hours, better working conditions, cooperative stores, and a school for the children” (Kramer, 2001, p.58).  Owen’s attempt at a cooperative settlement reinforced the ideas and values sponsored by socialism and rejected the new economic system as well as the liberal concept of laissez-faire system.

 

Another social theorist was Henri Saint-Simon who rejected laissez-faire systems “because he thought a well-planned economy would work better” (Kramer, 2001, p.59).  Saint-Simon was different from other theorists.  He rejected liberal theories while accepting the fact that a new age had started with the Industrial Revolution and there was no way of returning to the ideas of simple agricultural communities (lecture 12).  Saint-Simon called for more control over the business community rather than calling for their elimination.

 

Like Owen and Saint-Simon, Charles Fourier rejected both liberalism and classical economic theory because they did not go far enough in providing for equality and personal freedoms. Fourier developed a theory based on a division of labor.  In his ideal society, a Phalanx, everyone worked at what they were good at and the products divided equally among the community.  However, like Owen’s ideas of a utopian society, Fourier’s ideas lacked cohesion to develop beyond a small cooperation and could not be applied to large population areas (lecture 12).

 

While Liberalism was associated with the protection of personal liberties, the Industrial Revolution rejected the individual in lieu of accumulating vast amounts of wealth in a laissez-faire system.  As conditions grew despondent for the workers of the new industrialism, critics like Owen, Saint-Simon, and Fourier rejected both liberalism and wanted a reorganization of industrialization in favor of societies which stressed that “industrialization itself was not the problem; the problems emerged in the specific economic systems that was developing the new industries- the capitalist market system” (Kramer, 2001, p.57).