LAISSEZ-FAIRE

1
LAISSEZ-FAIRE

• Major component of middle-class political thought
  during the 19th century
• It was the idea that government should stay out
  of business affairs, that it should allow the
  marketplace free play to determine the direction
  and intensity of economic development
• It was developed first in England and then
  spread, along with industrial capitalism, to the
  rest of Europe and the United States

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QUESTIONS FOR TODAY

• How did the idea of laissez-faire develop in
  England?
• Why did it take such a strong hold there?
• Was it ever really practiced there?
• If laissez-faire was never really implemented in
  the country where the idea was invented, then it
  must be relegated to the status of an utopian
  dream that looks good in theory but is impossible
  to apply successfully in reality

3
UNIQUENESS

• Because England was a pioneer in
  industrialization, its take off phase possessed
  several unique characteristics that later
  industrializing countries did not, and perhaps
  could not, possess

4
CAPITAL ACCUMULATION

• England had not been under any pressure to catch
  up during its industrial revolution
• State was therefore not required to play a direct
  and active role in economic development
• Capital accumulation was a gradual process
• Undertaken initially by wealthy landlords and
  merchants
• Capital requirements were relatively small
• British industrialization depended on individual
  enterprise, not active state intervention

• In order to catch up with already industrialized
  England, other countries had to rapidly
  accumulate and mobilize large amounts of capital
• The best way to facilitate this process was to
  have the state play an active role
• This meant laissez-faire had no foundation in the
  economic reality of these countries

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POSSESSIVE INDIVIDUALISM

• Thomas Hobbes, John Locke and James Harrington
  had developed theory of possessive
  individualism
• Strongly defended the sanctity of private
  property and individual liberty
• Argued that it was best for society to allow men
  the freedom to dispose of their private property
  as they say fit
• Idea was already formulated before the Industrial
  Revolution

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SUMMARY THUS FAR

• Two phenomena combined to make British unique in
  their commitment to laissez-faire
• Metaphysical
• Structural
• Laissez-faire therefore did have a certain degree
  of reality in 19th century England
• Forged from a combination of the objective
  conditions surrounding the worlds first
  industrial revolution and from the subjective
  influence of the old liberal tradition, many
  people viewed any form of state control of its
  citizens as a constraint on economic progress

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THE CORN LAWS

• Corn Laws passed in 1815 to protect agricultural
  interests that were hurt by the drop in prices
  for agricultural products that followed the end
  of the Napoleonic Wars
• Set up price supports and high import tariffs to
  keep prices for agricultural products
  artificially high

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ANTI-CORN LAW LEAGUE

• Middle class reformers criticized Corn Laws as an
  impediment to the free activity of the
  marketplace
• Anti-Corn Law League formed in 1840s
• Argued that Corn Laws had caused depression
  because high tariff on imported grain had made
  agricultural countries less able and willing to
  buy British manufactured products
• Classic laissez-faire argument
• State interference in the economy had disrupted
  the free flow of commerce and caused unnecessary
  hardship

Anti-Corn Law League Meeting
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THE OTHER SIDE OF LAISSEZ-FAIRE

• Laissez-faire had another dimension which seemed
  to contradict the unrestricted play of free
  trade, individualism, and private property
• The indirect role played by the British
  government in the economy
• For laissez-faire did not simply mean staying out
  of economic affairs
• It also meant that the government had a
  responsibility to create the proper environment
  for free economic exchange

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INDIRECT INTERVENTION IN THE 18TH CENTURY

• Establishing Englands commercial power
  throughout the world
• Through war against rivals, conquest, and naval
  protection
• Creation of stable institutional framework
  through which individual entrepreneurs could
  prosper
• Uniform body of laws, guarantees of individual
  rights, destruction of barriers to social
  mobility
• Government orders for industrial products
  prepared England for economic growth in the 19th
  century

French and Indian War
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SOCIAL POLICY

• Need to create the correct environment for
  economic activity collided with the negative
  effects generated by that activity
• Industrialization had broken down old forms of
  social control and new forms had yet to mature
• Hence turbulent nature of early 19th century
• Some forms of preindustrial behavior persisted
• Popular sports, regional dialects, ignorance,
  various superstitions
• Seen as dangerous because they left workers open
  to radical agitation and reduced productivity
• Could not adopt a hands off policy to these
  social problems
• Threat to civilized society and economic growth
  was too real
• State had to intervene

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ENVIRONMENTAL REFORM

• Saw social, political, and cultural environment
  of the working class as the source of most social
  problems
• Primary goal of state intervention was the
  improvement of this environment
• Included municipal improvements, model working
  class housing, sanitation reforms, ect.
• Examples were Factory Acts of 1831 and Ten Hour
  Act of 1833

Model Housing
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MORAL REFORM

• Considered values and behavior of workers to be
  the big problem
• If worker morals could be uplifted, then their
  productivity would increase and threat of
  disruption would diminish
• Sunday school Movement

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BEGINNING OF THE WELFARE STATE?

• On the surface, environmental and moral reform
  seemed to contradict the principle of
  laissez-faire
• The main purpose of this sort of state
  interference was to create and protect a climate
  favorable to free enterprise
• They were not welfare policies based on the
  principle that the state had a duty to guarantee
  a certain level of existence for all its citizens
• Intended to make the world safe for laissez-faire

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LIMITS OF LAISSEZ-FAIRE

• Reality of laissez-faire was powerful in early
  19th century England
• Influenced the structure of industry
• Conditioned men to mistrust state intervention in
  their individual and business affairs
• It determined the type, extent, and purpose of
  state intervention
• But the fact that the principle of
  non-intervention had to be suspended on occasion
  to protect free enterprise illustrates the limit
  of the reality of laissez-faire
• Workers were not always willing to let themselves
  be bounced around by the free play of the
  marketplace
• In response, they organized, embraced socialist
  ideologies, and sometimes resorted to violence
• This forced state to intervene to protect
  individualism and private property

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IRELAND

• Was a conquered country in the 18th century
• Mass of population were Roman Catholic peasants
  who rented land from a minority of Protestant
  English landlords
• Many of whom were absentee owners who lived in
  England
• They lacked improving zeal of English landlords
  and squeezed their Irish tenants as hard as
  possible for their income

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HORRIBLE CONDITIONS

• Condition of Irish peasants was horrible
• Lived in wretched huts made of mud
• Did not even have shoes
• Many reports describe hopeless poverty
• But Irish population skyrocketed from 3 million
  in 1725 to 4 million in 1780 to 8 million in 1840
• Despite the fact that nearly 2 million had left
  between 1780 to 1840

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REASON 1 THE POTATO

• Principle food of Irish peasants by late 18th
  century
• Rise of the potato was caused by population
  growth which forced peasants to find ways to
  wring as many calories as possible from a given
  piece of land
• Potatoes allowed for larger families than
  previously
• Single acre planted in potatoes could feed a
  family of six for a year
• It would take 4 acres of grain and pasture to do
  the same thing
• Potatoes could also be grown in areas where grain
  could not
• Boggy wastelands

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REASON 2 EARLY MARRIAGE

• Since they only needed an acre or two to support
  a family, Irish youths married early
• Had more children than they would have had if
  they had married later
• Condemned to a life of extreme poverty
• Lived on potatoes for their entire life

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REASON 3 EXPLOITATION

• Landlords, not peasants, owned land
• Peasants could only lease land for short periods
• No guarantee lease would be renewed and therefore
  no incentive for peasants to make improvements
• Poverty was therefore inescapable in Ireland and
  at least having a family made it a little more
  bearable
• Children, although a liability when they were
  young, were a persons only chance of survival in
  their golden years

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THE GREAT FAMINE

• Potato crop was susceptible to disease
• Potatoes could not be stored for more than a year
  so there was nothing to fall back on when a crop
  failed
• Problems with crop began in the 1820s
• Great Famine
• 1845, 1846, 1848, and 1851crop totally fails
• Widespread starvation, mass epidemics, and
  cannibalism

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DEVASTATION

• Losses were staggering
• Population should have grown from 8 to 9 million
  between 1845 and 1851
• It instead dropped from 8 to 6 ½ million during
  this period
• Net loss of 2 ½ million
• 1 million left for U.S.
• 1 ½ million died
• British efforts at famine relief were too little
  and too late
• Government continued to collect taxes and
  landlords continued to demand their full rents
• Peasants who could not pay were evicted without
  mercy

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A NEW EQUILIBRIUM

• Ireland was only country in Europe to experience
  population decline during the 19th century
• Only had 4 million people in 1911
• Became source of continual out-migration
• Nobody moved there but lots of people left
• Became country of late marriage and celibacy
• As landlords discouraged potato farming and
  converted much of the land to pasture

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SUMMARY

• Ireland is excellent example of what happened
  when a country experiences rapid population
  growth without industrialization
• Result is terrible poverty, starvation, epidemics
• Total demographic catastrophe
• Probably would have happened in England too if
  its population explosion had not been accompanied
  by industrialization
• The alternative to industrialization was
  catastrophe