Nassau Senior and the Poor Laws – Everything Old is New Again

Nassau Senior (1790-1864) was a lawyer with an interest in social, economic, and political issues. He was a friend of many of the more prominent members of the Whig party and he was the party’s general adviser on matters involving economic and social issues. In 1825 he was appointed to the first chair of political economy at Oxford University. In his early years, his main concern was the causes and consequences of poverty and the standard of living of the poor. Prior to 1830 Senior had considerable sympathy for the plight of the poor, and his concern appears to have been generally benevolent. He rejected Malthus’ population theory which implied long-run misery for the masses and instead believed that improvements in productivity would coincide with increases in moral character to lift the poor from their misery. He saw moral education as the only answer to poverty and actively promoted efforts to uplift intellectual and moral standards.

Conditions for the working class during this time were almost, if not surely sub-human. Exploitation and degradation were commonplace and there came a time in the 1820s and 1830s when labor began to organize and fight back. The result was widespread strikes, industrial sabotage, riots, and fires, all of which had a great influence on Senior. He changed. He particularly cited “the fires and insurrections which terrified the south of England in the frightful autumn of 1830” (Nassau Senior, Industrial Efficiency and Social Economy, 2 vols. (New York: Holt, 1928), 2:156). He came to believe that the poor laws and government’s dole to the poor and the unemployed were the principle causes and consequences of poverty and that this threatened to undermine the very existence of capitalism in England.

In 1830 Senior published Three lectures on the Rate of Wages (New York: Augustus M. Kelley, 1966). After the unrests in the autumn of 1830, he added a preface called “The Causes and Remedies of the Present Circumstances” the source of the famous wages fund doctrine. Setting aside all the finer details, the essence is that there is a fixed pool of income to divide among workers and the size of the pool is determined solely by labor productivity. Thus, to improve living conditions, labor productivity has to rise or the number of poor depending upon the fixed fund has to fall.

How to increase labor productivity? He advocated two solutions. First, the removal of all restrictions on free commerce and the accumulation of capital. Second, abolition of the poor laws which “made wages not a matter of contract between the master and the workman, but a right for one, and a tax on the other.” Senior was no longer worried about the misery caused by poverty. The events of 1830 led him to worry about the “threat of an arrogant laboring class, resorting to strikes, violence, and [unions], a threat to the foundation not merely of wealth but of existence itself.” Poor laws and dole led to a decreased incentive to work and created the arrogant attitude that workers and their families had a right to exist even if they could not or would not find work.

With his connections to the powerful Whig party, Senior was able to put some of his ideas into practice. In 1832 he was appointed to the Poor Law Inquiry Commission which was to study existing poor laws and methods of dealing with poverty and recommend reform. The report issued in 1834 was by all accounts largely Senior’s work. The new law stated:

1. Workers should accept any job the market offered, regardless of working conditions or pay.
2. Any person who would not or could not find work should be given just enough to prevent physical starvation.
3. The dole given to such a person should be substantially lower than the lowest wage offered on the market, and the workers general condition should be so miserable and should so stigmatize so as to motivate the search for employment irrespective of pay or conditions.

One historian, E.J. Hobsbawn (Industry and Empire: An Economic History of Britain since 1750, London: Weidenfeld & Nicolson, 1968) wrote about the poor law Senior was influential in creating and said the law was

…an engine of degradation and oppression more than a means of material relief. There have been few more inhuman statutes than the Poor Law of 1834, which made relief “less eligible” than the lowest wage outside, confined it to the jail-like workhouse, forcibly separated husbands, wives, and children in order to punish the poor for their destitution, and discourage them from the dangerous temptation of procreating further paupers.

With so much discussion of economic security today, it's hard not to be reminded of this time period in history. Whenever I go back and read about these times, the people, the policies, echoes of present day policy debates are everywhere. It is quite remarkable how little is truly new in this world. A close look at the principles underlying contemporary rules for Unemployment Compensation reveals strong echoes of Senior’s policies. Much of the rhetoric surrounding welfare reform, Social Security reform and so on can be found in the literature surrounding the birth of capitalism and its struggle against socialist ideas, ideas abounding during Senior’s time. As we embark upon another episode where these same ideas clash, are we fully aware of how this resolved itself in the past when societies struggled with the same issues?

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*This dicussion follows E.K. Hunt's History of Economic Thought:  A Critical Perspective, Wadsworth:  Belmont, California, 1979 treatment of this topic.

Comments

[Lee A. Arnold]

Karl Polanyi wrote that the Poor Laws were ultimately a response to Enclosure, which created an army of the dispossessed. It would be interesting to know whether Senior recognized this origin of the Laws, and how he reconciled this with his theory that the legislation itself was now to blame for the continuance of poverty. Perhaps we should allow his belief that capitalism might finally solve it, since he lived so near the beginning of the system of liberty.

Of course, at the present time, we have just gone through another 20-30 year period when the welfare laws were again blamed for the perpetuation of poverty, this time as part of American-conservative political rhetoric. But 225 years or so after Smith, with lots and lots of economic growth and productivity since his time, the explanation now rings hollow, and people who argue this way must be underschooled, or perhaps have ulterior motives.

Certainly it is possible to point to the psychology of welfare dependency for turning some people into a repellent type. Of course there are others in whom that effect does not occur. Either way it seems unlikely that markets provide a solution to the problem of poverty, or else we would have turned that key by now.

What if there is no solution? It appears that wealth concentrates by at least five different avenues: individual ability, social status, geographic location and centralization, increased returns to technology, and private ownership. These wax and wane by their own rules, and over long stretches of time. Some are occasionally ministrable; others we do not care to touch. It may be that the correct way to deal with the resulting inequality is the way we have dealt with it so far, as a matter of fact: i.e., by political elixirs and bandages, waxing and waning in the democratic process.

One thing that is new in this world is environmental limits. You have to be ignorant of biosystems to believe that a multiplying population will not outgrow its resources, nor its ability to innovate and substitute, nor its ability to price a reaction in time. The world population will explode to double in the next mere 50 years. A new twist in the inequality debate is sure to be "human rights" in a world of diminishing opportunity to use resources, and indeed this complaint grows louder, although Americans seem mostly oblivious, and still chasing their own tails.

[kevin quinn]

Thanks for this, Mark. It is amazing how persistent has been the error of characterizing the desire for security as a wrench thrown into the Efficiency Machine. It's true, eg., that decoupling income and productivity to some extent dulls incentives and to that extent reduces efficiency. But a complete coupling of the two, in a world where productivity is only observed noisily and owners are well diversified, reduces efficiency by spreding risks inefficiently. Similarly, a well-designed social insurance system, by providing security, raises certainty-equivalent income. Equity is important, to be sure, but Efficiency dictates some degree of social insurance quite apart from its consequences for equity