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Tuesday, March 02, 2010

The “Threat of an Arrogant Laboring Class, ...a Threat to the Foundation not Merely of Wealth but of Existence Itself”

As you've probably heard, even though we are just beginning to see a way out of a deep recession that has long-term unemployment rising to historic levels, Republicans are blocking the extension of unemployment benefits. Joe Klein explains why:

This Is Getting Good, by Joe Klein: Jim Bunning is doing all of us a favor. As this comment from the Number 2 Senate Republican, Jon Kyl of Arizona, makes clear, the Republicans are turning toward a form of reactionary radicalism that is well to the right not only of traditional conservatism, but also of post-Victorian concepts of government and--not to put too fine a point on it--of common decency as well:
Sen. Jon Kyl of Arizona, the Republican whip, argued that unemployment benefits dissuade people from job-hunting "because people are being paid even though they're not working." Unemployment insurance "doesn't create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work,"
The idea that those who have lost their jobs in this Wall Street/mortgage-scam recession are simply deadbeats, choosing to stay on unemployment rather than look for work, seems more appropriate to Scrooge's London than the 21st century. But Kyl has spoken his version of the truth, and we should be grateful for that: this is what the Republican Party is now all about. ...
Let's call the roll. Let's see how many allies Jim Bunning and Jon Kyl have. Let's find out their names and remember them. This is so important that we should stop all other business: Let them filibuster...and spend hours telling us exactly what else they would abolish.

The quote from Kyl reminds me of a quote from Nassau William Senior (1790-1864). Senior was head of the Poor Law Commission that rewrote the existing laws dictating when relief to the poor would be paid. To give you some idea of what this was all about, note that "Oliver Twist was written in retaliation against the Poor Law."

In his book Three Lectures on the Rate of Wages, Senior explains why he believes that relief for the poor will lead them to acquire the attitude that they have the right to exist without having to do any work:

greater exertion and severer economy are ... [the laborer's] resources in distress; and what they cannot supply, he receives with gratitude from the benevolent. The connexion between him and his master has the kindliness of a voluntary association, in which each party is conscious of benefit, and each feels that his own welfare depends ... on the welfare of the other. But the instant wages cease to be a bargain-the instant the labourer is paid, not according to his value, but his wants, he ceases to be a free man. He acquires the indolence, the improvidence, the rapacity, and the malignity, but not the subordination of a slave. He is told that he has a right to wages .... But who can doubt that he will measure his rights by his wishes, or that his wishes will extend with the prospect of gratification? The present tide may not complete the inundation, but it will be a dreadful error if we mistake the ebb for a permanent receding of the waters. A breach has been made in the sea-wall, and with every succeeding irruption they will swell higher and spread more widely. What we are suffering is nothing to what we have to expect.
Let me back up and repeat from an old post (from four and a half years ago):

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, 2:156). 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. 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.

[Since I didn't mention the connection between the Poor Laws and the workhouses of the 1850s and 1860s, let me add this update: "The Commission's recommendations were based on two principles. The first was less eligibility - conditions within workhouses should be made worse than the worst conditions outside of the workhouse so that workhouses served as a deterrent - only the most needy would consider entering them. The other was the "workhouse test," that relief should only be available in the workhouse. ... Despite the fact that the Act was passed in 1834 most workhouses were erected in the 1850s and 1860s and until then the 'workhouse test' did not operate."]

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

Whenever I go back and read about these times, the people, the policies, there are echoes of present day policy debates everywhere. To repeat a cliche, 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 begin another episode where these same ideas clash, are we fully aware of how this resolved itself in the past when societies struggled with the very same issues?
*This discussion relies heavily upon E.K. Hunt's History of Economic Thought: A Critical Perspective.

    Posted by on Tuesday, March 2, 2010 at 12:09 AM in Economics, History of Thought, Social Insurance | Permalink  Comments (55)


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